Hanesbrands Inc. announced on Wednesday that it has agreed to sell its global Champion business to Authentic Brands Group (ABG) in a deal valued at $1.2 billion. This transaction includes a contingent cash consideration, with the potential to increase to $1.5 billion based on performance thresholds. This strategic move marks a significant shift for Hanesbrands as it aims to streamline its operations and focus on its core innerwear brands.
The deal includes an additional contingent cash consideration of up to $300 million, depending on Champion’s performance, as detailed in the press release from Hanesbrands. The company anticipates net proceeds of $900 million from the transaction, which it plans to utilize to accelerate debt reduction. This financial maneuver is expected to bolster Hanesbrands’ balance sheet, providing the company with greater financial flexibility and stability.
Following the announcement, Hanesbrands’ shares surged by more than 5% during Wednesday’s trading session, reflecting investor confidence in the company’s strategic direction and financial health. As of the end of the first quarter of 2024, Champion had generated approximately $75 million in adjusted EBITDA over the past 12 months, showcasing its significant contribution to Hanesbrands’ overall financial performance.
“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,” said Bill Simon, Chairman of the Hanesbrands board. The board of directors approved the agreement unanimously, underscoring the collective confidence in this strategic divestiture.
The decision to sell Champion comes after months of deliberation and market speculation. In November 2023, CNBC reported that both Authentic Brands Group and WHP Global, another prominent brand management firm, were interested in acquiring Champion. This announcement follows Hanesbrands’ September declaration that it was considering divesting Champion, a move influenced by activist investor Barington Capital Group. Barington had been pressuring Hanesbrands to cut costs and improve cash flow in response to declining sales.
The sale to ABG, known for managing a diverse portfolio of iconic brands, is expected to position Champion for continued growth and expansion. For Hanesbrands, this transaction signifies a renewed focus on its core competencies and a strategic pivot aimed at long-term profitability and market leadership in the innerwear segment.
The sale of Champion to Authentic Brands Group represents a pivotal moment for Hanesbrands, aligning with its goals to reduce debt, streamline operations, and enhance shareholder value. This strategic divestiture will enable Hanesbrands to concentrate on its primary brands, ensuring sustained growth and robust financial health in the years to come.