Gildan Activewear has agreed to buy Gold Toe Moretz Holdings, which is backed by the Blackstone Group. The total purchase price is about $350 million but Gildan will not assume any of Gold Toe’s outstanding debt. Gold Toe supplies athletic, casual and dress socks and has been rumored to be near bankruptcy for months. Blackstone acquired the company in 2006 in a deal valued at $466 million. The majority of the purchase price will be represented by intangible assets, including the value of these brands, a statement said.
Gildan Activewear Inc. (TSX:GIL)(NYSE:GIL) today announced that it had signed a definitive agreement to acquire 100% of the common shares of Gold Toe Moretz Holdings Corp. (Gold Toe Moretz) for a total purchase price of approximately U.S. $350 million. Gildan will not assume any of Gold Toe Moretz’s currently outstanding indebtedness.
Gold Toe Moretz is a leading supplier of high-quality branded athletic, casual and dress socks for mass-market retailers, national chains, price clubs, department stores and specialty sporting goods stores in the U.S. Gold Toe Moretz’s company-owned brands include the iconic Gold Toe® brand, as well as the Silver Toe®, GT®, Auro®, PowerSox® and All Pro® brands. Gold Toe Moretz is also the exclusive U.S. licensee for Under Armour® and New Balance® branded socks. The majority of the purchase price will be represented by intangible assets, including the value of these brands.
“The acquisition of Gold Toe Moretz represents an important and exciting step in Gildan’s ongoing strategic development”, said Glenn J. Chamandy, President and Chief Executive Officer of Gildan Activewear. “In addition to the introduction of leading consumer brands, the acquisition provides Gildan with enhanced brand management experience and expertise, best-in-class merchandising and strong technical innovation and design capabilities to complement Gildan’s existing competitive strengths for retail. These capabilities can also be utilized to further the development of our own Gildan brand.”
Gold Toe Moretz’s senior management team, including John Moretz, Chairman and Chief Innovation Officer, and Steve Lineberger, President and CEO, have committed to continue their careers with Gildan.
The acquisition will more than double Gildan’s current revenues from the sale of socks and will significantly expand and diversify its customer base and channels of distribution within the U.S. retail market. Revenues reported by Gold Toe Moretz for the year ended December 31, 2010 amounted to over U.S. $280 million, and adjusted EBITDA(1) for the same period amounted to U.S. $48.6 million.
Gildan believes that the combination of the competitive strengths of the two companies, and Gildan’s support for the further development of Gold Toe Moretz’s owned and licensed brands, will create a strong platform for further organic sales growth in socks and other retail product categories. In addition, Gildan currently expects to be able to achieve U.S. $10-$15 million of annualized cost synergies, which would be gradually realized over the next 24 months.
There are no material conditions precedent to the closing of the transaction and the acquisition by Gildan of Gold Toe Moretz is expected to close imminently. The acquisition will be financed out of Gildan’s cash balances and the utilization of its revolving bank credit facility.
“Our management and Board of Directors believe that the acquisition by Gildan of Gold Toe Moretz represents an attractive use of our capital as it is expected to generate a return on investment in excess of our risk-adjusted cost of capital and be immediately accretive to EPS”, said Laurence G. Sellyn, Gildan’s Executive Vice President, Chief Financial and Administrative Officer. Gildan will update its financial outlook for fiscal 2011, including the impact of the acquisition of Gold Toe Moretz, when it reports its results for its second fiscal quarter on May 11, 2011.
Information for Shareholders
Gildan Activewear Inc. will hold a conference call to discuss this announcement today at 5:00 PM EDT. The conference call can be accessed by dialing 800-261-3417 (Canada & U.S.) or 617-614-3673 (international) and entering passcode 68975570, or by live audio webcast on Gildan’s Internet site (“Investor Relations” section) at the following address: http://gildan.com/corporate/IR/webcastPresentations.cfm. If you are unable to participate in the conference call, a replay will be available starting that same day at 8:00 PM EDT by dialing 888-286-8010 (Canada & U.S.) or 617-801-6888 (international) and entering passcode 96136246, until April 18, 2011 at midnight, or by audio webcast on Gildan’s Internet site for 30 days.
Gildan is a vertically-integrated marketer and manufacturer of quality branded basic apparel. Gildan is the leading brand in the screenprint market in the U.S. and Canada and is also establishing a growing presence in Europe, Mexico and the Asia-Pacific region. The Company sells T-shirts, sport shirts and fleece as undecorated “blanks”, which are subsequently decorated by screenprinters with designs and logos. Gildan is also a leading supplier of socks sold to mass-market and other retailers in North America, and is increasingly becoming a significant supplier of underwear and undecorated activewear products to this market as well. With over 28,000 employees worldwide, Gildan owns and operates highly efficient, large-scale, environmentally and socially responsible facilities in Central America and the Caribbean Basin and has begun development of a manufacturing hub in Bangladesh to support its planned growth in Asia and Europe. More information on the Company can be found on Gildan’s website at www.gildan.com.