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Hanesbrands Fills Portfolio by Buying Bra Company Maidenform

Douglas A. McIntyre

Hanesbrands Inc. (HBI), a maker primarily of means underwear, will buy women's bra company Maidenform Brands Inc. (MFB). It is hard to say why the marriage will help either company, but Hanes shares rose almost 10% and Maidenform's by 22%. The buyout is at a 23% premium to Tuesday's close. One has to wonder why Maidenform's management was doing such a poor job improving shareholder value.

On a fiscal basis, net sales at Hanesbrands increased 5% to $1.15 billion in the fourth quarter, compared with the year-ago quarter, and increased 2% to $4.53 billion for the full fiscal year. Fourth-quarter adjusted EPS more than doubled to $1.07, excluding bond prepayment expenses that reduced earnings per share (EPS) by $0.30. Each of the company's business segments reported at least double-digit operating profit growth in the quarter. Full-year adjusted EPS increased 7% to $2.62

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Maidenform's results have not been as strong, which may be the main reason its board decided to sell the company. Net sales in the other channel decreased $5.7 million, or 21.0%, to $21.5 million for the first quarter of 2013, primarily from sales declines to a specialty retailer and from decreased program sales to off-price retailers, which were somewhat offset by higher liquidation sales. The net income for the first quarter of 2013 and 2012 was -$1.2 million and $5.8 million, respectively, and earnings results for the same periods were a loss per share of $0.05 and EPS of $0.25, respectively.

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An M&A bailout? It certainly looks that way. Synergy? Of course.

Hanesbrands, by the way, thinks it will do unusually well. It said in its most recent earnings announcement that for 2013, it expects net sales of approximately $4.6 billion, operating profit of $500 million to $550 million and EPS of $3.25 to $3.40. The company expects a decline in branded printwear sales of $40 million to $50 million, with approximately half of the decline occurring in the first quarter, reflecting rationalization that started in mid-2012.

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