HanesBrands to sell Champion brand to Authentic Brands Group for $1.2bn

HanesBrands Inc. (NYSE: HBI) has announced a definitive agreement to sell the intellectual property and certain operating assets of its global Champion business to Authentic Brands Group for a base transaction value of $1.2 billion. This deal could potentially escalate to $1.5 billion should certain performance thresholds be met, allowing for an additional contingent cash consideration of up to $300 million.

Transaction Details and Strategic Shifts

The sale, unanimously approved by HanesBrands‘ Board of Directors, represents a pivotal shift as the company concludes its strategic review of the Champion business. The transaction is set to be completed in the second half of 2024, subject to customary closing conditions. Following the sale, HanesBrands plans to refocus its efforts on enhancing its leadership in the innerwear market and expanding its portfolio, which includes well-known brands such as Hanes, Bonds, Maidenform, and Bali.

Bill Simon, Chairman of the Board, expressed confidence in the decision, stating, “Following a thorough review of options for the global Champion business with the support of our financial and legal advisors, we are pleased to have reached this agreement with Authentic Brands Group that we believe maximizes value for Champion and best positions HanesBrands for long-term success.”

Financial Health and Operational Strategy

Steve Bratspies, CEO of HanesBrands, highlighted the transformative impact of the sale, “The successful completion of this transaction further simplifies our business, deleverages our balance sheet and enhances the Company’s operations and financial performance.” He added that this strategic move marks the beginning of a new chapter for HanesBrands, focusing on leadership in innerwear and exploring new cost reduction opportunities.

HanesBrands anticipates net proceeds of approximately $900 million from the transaction, accounting for working capital adjustments and other customary transaction costs, excluding the contingent cash consideration. The company intends to use all net proceeds to accelerate its debt reduction efforts, aiming for significant deleveraging on a net debt-to-adjusted EBITDA basis.

Anticipated Impact on Financial Reporting

In terms of financial reporting, Champion will be classified as discontinued operations starting in the second quarter of 2024. HanesBrands also plans to update its full-year 2024 guidance during its second-quarter earnings release, reflecting the new business structure.

Advisors and Additional Transaction Services

Goldman Sachs & Co. LLC and Evercore have served as financial advisors, with Kirkland & Ellis LLP and Jones Day providing legal counsel to HanesBrands in this transaction. Additionally, HanesBrands will offer certain transition services to Champion, including operating the business in select regions during a transition period.

In conclusion, this transaction not only signifies a strategic refocusing for HanesBrands but also enhances its financial flexibility and operational efficacy. By divesting Champion, HanesBrands is poised to further strengthen its core business segments and continue its trajectory towards sustained growth and profitability.