HanesBrands' Proposed Sale to Gildan Activewear: Corporate Governance Scrutiny and Shareholder Value Concerns

The proposed $2.2 billion acquisition of HanesBrands Inc. (NYSE: HBI) by Gildan Activewear Inc. (NYSE: GIL) has ignited significant scrutiny over corporate governance practices and shareholder value protection. While the transaction-offering HanesBrands shareholders 0.102 common shares of Gildan and $0.80 in cash per share-has been touted as a strategic move to consolidate the basic apparel market, multiple investigations are now probing whether the deal's terms and process adhere to fiduciary standardsHANESBRANDS INVESTOR ALERT by the Former Attorney General of Louisiana^[1].

Corporate Governance and Board Accountability

The HanesBrands board's unanimous approval of the sale has raised red flags for investors. Critics argue that the board's independence and decision-making rigor may be compromised, particularly given the overlap in product lines and distribution channels between the two companies. According to a report by BusinessWire, law firms such as Kahn Swick & Foti, LLC and Wohl & Fruchter LLP are investigating whether the board fulfilled its duty to maximize shareholder valueHanesBrands Inc. (NYSE: HBI) – Kahn Swick & Foti, LLC^[2]. The firms are examining whether the board adequately disclosed material information, such as potential antitrust risks and the long-term strategic implications of the mergerHBI Alert: Monsey Firm of Wohl & Fruchter Investigating^[3].

The deal's structure-valuing HanesBrands at $6.00 per share, significantly below its 52-week high of $9.10-has further fueled concerns. Shareholders have expressed dissatisfaction, with some calling the offer a "terrible deal for HBI" and noting that HanesBrands was "just turning around"Investigation on HanesBrands Sale to Gildan: What Investors Need^[4]. This discrepancy underscores the need for rigorous governance oversight to ensure boards act in shareholders' best interests during high-stakes transactions.

Price Adequacy and Shareholder Dissatisfaction

The Kahn Swick & Foti, LLC investigation, led by former Louisiana Attorney General Charles C. Foti, Jr., is a focal point of this debate. The firm is assessing whether the proposed consideration undervalues HanesBrands, particularly given the company's recent financial performance. HanesBrands reported strong fourth-quarter and full-year 2024 results, demonstrating resilience amid market challengesAnnual Reports | Hanesbrands Inc.^[5]. Yet the $6.00 per-share offer implies a 34% discount to its 52-week high, raising questions about the fairness of the valuationHanesBrands, Gildan merger could face antitrust scrutiny^[6].

Data from Morningstar indicates that the deal's terms may not fully reflect HanesBrands' potential. The firm's Full Potential plan and capital allocation strategies were designed to drive sustainable value creation, yet the merger offer appears to disregard these initiativesHanesBrands Inc. - Ademi & Fruchter LLP^[7]. This disconnect has prompted investors to question whether the board prioritized short-term gains over long-term value.

Procedural Flaws and Legal Scrutiny

The investigations also highlight procedural gaps in the sale process. For instance, the Ademi Firm is probing whether the HanesBrands board conducted a robust auction process to secure the best possible offerGildan and HanesBrands Agree to Combine To Create a Global ...^[8]. A lack of competitive bidding could indicate a failure to meet fiduciary duties, particularly in a market where Gildan's acquisition of HanesBrands would create a dominant player in basic apparel.

Moreover, the transaction faces antitrust scrutiny due to overlapping operations in men's and women's underwear, hosiery, and shirtsHanesBrands, Gildan merger could face antitrust scrutiny^[9]. Regulators may require divestitures or impose conditions that dilute the merger's strategic benefits. Such risks further justify the need for transparent governance and thorough due diligence.

Implications for Shareholders and Investors

For shareholders, the ongoing investigations underscore the importance of holding boards accountable. If the Kahn Swick & Foti, LLC probe finds procedural or valuation inadequacies, it could lead to class-action lawsuits or demands for renegotiation. Investors are advised to monitor regulatory developments and legal outcomes, as these could impact the deal's final terms and HanesBrands' stock price.

In the broader market, this case serves as a cautionary tale about the risks of mergers that prioritize strategic synergies over shareholder value. As the apparel industry consolidates, boards must balance growth ambitions with governance rigor to avoid eroding trust.