Gildan's HanesBrands Acquisition: BMO's Positive Outlook

BMO is "positive" on Gildan's acquisition of HanesBrands. Gildan Activewear is a vertically integrated manufacturer of everyday basic apparel, including activewear, underwear, and hosiery products. The company markets its products in North America, Europe, Asia Pacific, and Latin America under various brands, including Gildan, American Apparel, and Comfort Colors. Manufacturing operations are located in the US, Central America, the Caribbean, and Bangladesh.

Gildan Activewear's acquisition of HanesBrands is poised to create a "global basic apparel leader," according to BMO, which has expressed a positive outlook on the deal. The transaction, valued at $4.4 billion, will combine Gildan's activewear leadership with HanesBrands' intimate apparel expertise, enhancing product diversification and market positioning.

Gildan Activewear, based in Montreal, Quebec, specializes in the production of everyday basic apparel, including activewear, underwear, and hosiery. It markets its products under various brands such as Gildan, American Apparel, and Comfort Colors. HanesBrands, on the other hand, is a U.S. company focusing on intimate apparel, which includes brands like Hanes, Bonds, Maidenform, and Bali.

The acquisition, expected to close between late 2025 and early 2026, will see HanesBrands shareholders receiving 0.102 common shares of Gildan and $0.80 in cash for each share of HanesBrands stock. Post-transaction, HanesBrands shareholders will own 19.9% of Gildan shares.

BMO highlights the potential synergies and cost savings from the acquisition, estimating at least $200 million in annual cost synergies by 2028. The combined company will benefit from an advanced low-cost manufacturing network and a broader product offering.

Gildan has obtained $2.3 billion in committed financing for the acquisition and anticipates a net debt leverage ratio of 2.6 times adjusted earnings before interest, taxes, depreciation, and amortization at closing. The deal is subject to shareholder and regulatory approvals.

The acquisition is expected to double Gildan's revenues and enhance shareholder returns. Gildan has reaffirmed its full-year 2025 revenue and earnings per share guidance and provided a three-year outlook for 2026 to 2028, anticipating 3% to 5% net sales growth, 3% to 4% capital expenditures annually to support growth and vertical integration, and enhanced shareholder returns.

HanesBrands' board of directors chairman Bill Simon stated, "As part of Gildan, HanesBrands will benefit from an even stronger financial and operational foundation that will provide new growth opportunities – helping to power further innovation, a broader product offering and greater reach across channels and geographies."

Morgan Stanley & Co and CIBC Capital Markets acted as financial advisors to Gildan, while Sullivan & Cromwell and Stikeman Elliott served as legal advisors. Goldman Sachs & Co and Evercore served as lead financial advisors to HanesBrands, with Jones Day and Blake, Cassels & Graydon as legal advisors.

References:
1. [1] https://www.modaes.com/global/companies/gildan-activewear-considers-acquiring-hanesbrands-for-5-billion
2. [2] https://finance.yahoo.com/news/canada-gildan-acquire-us-apparel-105239659.html