UPDATE: D.A. Davidson & Co. Reiterates Neutral Rating, Raises PT on Hanesbrands as Acquisition Improves Earnings Power

In a report published Thursday, D.A. Davidson & Co. analyst Andrew Burns reiterated a Neutral rating on Hanesbrands HBI, and raised the price target from $89.00 to $100.00. In the report, D.A. Davidson & Co. noted, “Hanesbrands announced its intention to acquire DBApparel of France from private equity firm Sun Capital Partners for approximately €400 million ($550 million), which represents a 7.5x EV/EBITDA multiple. On a post-synergy basis, the purchase price multiple is expected to be less than 4x EBITDA. The acquisition is expected to be funded with cash on hand and debt; a $500 million institutional debt offering in European markets is being considered. With 2H cash flows, the adjusted leverage ratio is expected to be slightly north of 2x by year end. The transaction is expected to be accretive to earnings in the first 12 months, adding approximately $0.25 to earnings excluding acquisition costs. Upon full realization of operational synergies in 3-4 years, DBA could contribute $875 million in sales, $125 million operating profit, and $1.00 EPS. The deal could close as early as 3Q14, subject to customary closing conditions.” Hanesbrands closed on Wednesday at $96.72.