Hanesbrands to Foray into Europe with DBApparel Acquisition - Analyst Blog

Hanesbrands Inc. HBI has announced that it intends to take over Europe-based intimate apparel company DBApparel DBA, for approximately Euro 400 million or $550 million.

The buyout is in accordance with Hanesbrands' acquisition strategy as DBA sells intimate apparel — a core category of Hanesbrands. A major portion of the company's revenues comes from intimate apparel. It occupies No. 1 position in market share for intimate apparel in France and Spain and No. 2 in Italy; No. 1 in men's underwear in France and Spain; and No. 1 in hosiery in France and Germany.

The takeover will facilitate Hanesbrands' entry into the untapped market of Europe. Moreover, DBA's products complement those of Hanesbrands'. Further, both Hanesbrands and DBA manufacture majority of the products  instead of sourcing them from elsewhere.

The acquisition will bring DBA's popular brands like DIM (popular in several Western and Central European countries) and Hanesbrands' market leading brands like Playtex, Bali, Just My Size, Hanes, Barely There, Wonderbra, Champion and L'eggs under one banner. Strong national brands like NürDie hosiery in Germany, Lovable intimate apparel in Italy, and Abanderado men's underwear in Spain will also be added to Hanesbrands' portfolio. Hanesbrands expects the DBA acquisition to add adjusted earnings of approximately 25 cents per share in 2015 and approximately $1.00 annually by 2018.

Hanesbrands intends to finance the takeover with cash on hand and third-party borrowings. J.P. Morgan Securities LLC of JPMorgan Chase & Company JPM will finance the takeover which is expected to be closed in the third quarter of fiscal 2014 once the regulatory compliances of the deal are met.

The takeover of DBA comes within a year of Hanesbrands' buyout of the underwear apparel chain, Maidenform Brands Inc. in Oct 2013. The acquisition boosted one of Hanesbrands' core categories, intimate apparel, with the addition of popular brands like Flexees, Lilyette, Self Expressions and Sweet Nothings. The entire operation of the Maidenform Brands was integrated into Hanesbrands' system within three months of the deal closure. Hanesbrands expects to accrue profit from the Maidenform business by fiscal 2015.

We are encouraged by the Zacks Rank #2 (Buy) company's strategic moves in order to bolster its presence in the global intimate apparel and hosiery category. Like Maidenform, we expect the DBA acquisition to strengthen the intimate apparel category. In fact, the new acquisition will go a step ahead with its operations in Europe, where Hanesbrands did not have a presence.

Other Stocks to Consider

A couple of stocks in the same sector that are also performing well include Columbia Sportswear Company COLM and Michael Kors Holdings Limited KORS. Both the stocks sport the same Zacks Rank as Hanesbrands.