US clothing giant HanesBrands has launched a $1.1 billion takeover of Pacific Brands, the owner of Bonds underwear, Holeproof Sheridan sheets.
The board of Pacific Brands has recommended the “compelling” $1.15 a share cash offer, a 22% premium on yesterday’s closing price of $0.94.
The offer price is a multiple of 13.5 times 2015 EBITDA (earnings before interest tax depreciation and amortisation).
A fully franked special dividend of 9.4 cents a share is planned if the takeover goes ahead.
“Pacific Brands owns Australia’s leading underwear and home furnishing brands,” says chairman Peter Bush.
“HanesBrands has recognised the work done over the past two years that has seen the board and management team under CEO David Bortolussi’s leadership reshape and simplify the business to focus on our highest quality brands and improve operational performance.”
The New York Stock Exchange-listed company will use its extensive global footprint and supply chain network to enhance the competitive position of Pacific Brands.
“HanesBrands and Pacific Brands share a number of similarities including shared values and a focus on leading brands, design, innovation and quality,” says Bush.
“They intend to work with the Pacific Brands management team to support and invest in delivering the company’s growth strategy.
“HanesBrands can provide Pacific Brands with additional scale, sourcing benefits, financial flexibility and the opportunity to accelerate the growth of iconic brands such as Bonds and Sheridan.”
Bush expects the takeover will have limited impact on Pacific Brands operations and employees.
However, the brands Tontine and Dunlop Flooring are expected to be sold after the takeover. HanesBrands considers the businesses as having limited strategic fit.
Macquarie Capital and Herbert Smith Freehills are advising Pacific Brands. Goldman Sachs is advising HanesBrands.
Pacific Brands has returned to profit by cutting the number of products and focusing more on retailing its own wares rather than being a 100% wholesaler.
Along the way, the company ditched workwear label Hard Yakka and shoe brands including Grosby, Julius Marlow and Volley.
The long restructure, with manufacturing sent offshore, caught the eye of several private equity groups. Anchorage Capital Partners got the footwear brands.
In its latest half year results, Pacific Brands posted profit of $24.3 million, compared to a $108.7 million loss in the same six months the year before, on a 8.6% increase in sales to $425.3 million.
HanesBrand, based in North Carolina, sells T-shirts, bras, shapewear, underwear, socks, hosiery and activewear. It owns the brands Playtex and Wonderbra and has staff of 50,000.
Bonds was started in the Sydney suburb of Redfern in 1915 by George Allan Bond, an American.