Hanesbrands, the American clothing company known for its Champion brand, has agreed to sell its global Champion business to Authentic Brands Group for $1.2 billion. The deal includes a contingent cash consideration and has the potential to reach $1.5 billion if certain performance thresholds are met. Hanesbrands expects to receive net proceeds of $900 million from the transaction, which it plans to use to accelerate debt reduction.
This move comes as Hanesbrands looks to focus on its leading innerwear brands and optimize its supply chain. The company believes that selling Champion will enable it to deliver consistent growth and generate cash flow through a more focused strategy. Board Chairman Bill Simon stated, “We believe this transaction will enable the company to accelerate its debt reduction while positioning Hanesbrands to deliver consistent growth and cash flow generation through a focused strategy on advancing its leading innerwear brands and optimizing its world-class supply chain.”
The decision to sell Champion comes after months of consideration and pressure from activist firm Barington Capital Group. Barington Capital Group had been urging Hanesbrands to cut costs and generate cash amid declining sales. In response to this pressure, Hanesbrands began exploring the possibility of selling Champion in late September, and the board of directors unanimously approved the agreement with Authentic Brands Group.
The sale of Champion is expected to have a positive impact on Hanesbrands’ financials. As of the end of the first quarter of 2024, Champion had generated around $75 million of adjusted EBITDA over the past 12 months. With the proceeds from the sale, Hanesbrands will be able to reduce its debt and strengthen its financial position.
The news of the sale has been well-received by investors, as Hanesbrands shares jumped more than 5% during Wednesday’s trading session. This indicates that investors see the sale as a positive move for the company’s future growth and profitability.
In conclusion, Hanesbrands’ decision to sell its global Champion business to Authentic Brands Group for $1.2 billion is seen as a strategic move to accelerate debt reduction and focus on its leading innerwear brands. The sale is expected to strengthen Hanesbrands’ financial position and generate consistent growth and cash flow. With the net proceeds of $900 million, the company can now prioritize its core business and optimize its supply chain. Investors have responded positively to the news, as reflected in the increase in Hanesbrands’ share price. Overall, this transaction sets Hanesbrands on a path towards a more focused and financially stable future.
