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Hanesbrands Closes Maidenform Deal

Zacks Equity Research

Apparel retailer, Hanesbrands Inc. (HBI), has completed the takeover of the underwear apparel chain, Maidenform Brands Inc., for approximately $583 million. The buyout is in accordance with Hanesbrands’ acquisition strategy.

The acquisition was funded with cash and cash equivalents and short-term borrowings through revolving credit facilities. The revolving credit facilities are expected to be retired through Hanesbrands’ free cash flow.

Maidenform sells intimate apparel, which forms a core category of Hanesbrands. The average-figure bra business of Maidenform targeting younger buyers complements Hanesbrands’ full-figure bra business targeting older women. Moreover, Maidenform’s popular shapewear category fits in very well with Hanesbrands’ established panty business.

The acquisition brings Maidenform’s popular brands like Flexees, Lilyette, Self Expressions and Sweet Nothings and Hanebrands’ market leading brands like Playtex, Bali, Just My Size, Hanes, Barely There, Wonderbra, Champion and L’eggs under one banner.

However, the international operations of the two companies are limited and overlap only in Canada and Mexico. Both the companies have small businesses in Europe. Post the takeover, Hanesbrands plans to expand the Maidenform brands across the untapped Asian markets.

The Maidenform acquisition will augment Hanesbrands’ existing portfolio and allow it to offer tough competition to the likes of  L Brands Inc.’s (LTD) Victoria’s Secret, going forward.

The acquisition is expected to be accretive to Hanesbrands’ earnings in the first 12 months. Moreover, it is expected to generate additional revenues of $500 million, 60 cents in earnings per share, $80 million of operating profit and $65 million of free cash flow.

We believe that the acquisition synergy and the company’s endeavor to innovate continuously will keep Hanesbrands competitively ahead of its peers.

Currently, Hanesbrands has a Zacks Rank #3 (Hold). Investors should consider also stocks such as Michael Kors Holdings Ltd (KORS) and G-III Apparel Group Ltd (GIII), all carrying a Zacks Rank #1 (Strong Buy).

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