HanesBrands Acquires Knights Apparel for $200 Million

HanesBrands has entered into a definitive purchase agreement to acquire Knights Apparel, the licensed collegiate logo apparel brand.

Knights Apparel sells T-shirts, sweatshirts and other sports apparel with college logos and graphics primarily to mass merchant retailers. Knights sells apparel representing 400 of the largest U.S. colleges and universities, while Hanes' Gear for Sports division is already a leading seller of licensed collegiate apparel in university bookstores, utilizing the company's strong brands, company-owned apparel production, and company-owned graphic attribution and embellishment facilities.

Hanes is purchasing Knights, which is forecast to have sales of approximately $180 million for the full-year 2015, from affiliates of Merit Capital Partners. The all-cash transaction values Knights at approximately $200 million on an enterprise-value basis, or approximately 8 times expected full-year 2015 EBITDA. The post-synergy multiple is expected to be approximately 4.5 times EBITDA. Hanes intends to fund the acquisition with cash on hand and short-term borrowings on its revolving credit facility.

The acquisition, which is subject to antitrust review and other customary closing conditions, is expected to close early in the second-quarter 2015. Assuming an early second-quarter close, the acquisition is expected to add to the company's previously stated presplit 2015 financial guidance by approximately $160 million in net sales, approximately $18 million in adjusted operating profit excluding actions, and approximately $0.10 to presplit adjusted earnings per share excluding actions. Within two to three years when full synergies and benefits are realized, the purchase of Knights is expected to contribute approximately $0.30 of presplit annual adjusted EPS.

"This is an exciting acquisition opportunity to leverage our existing Gear for Sports licensed collegiate apparel business, our expertise and size in the mass retail channel, and our low-cost global supply chain," Hanesbrands chairman and CEO Richard A. Noll said. "Combining the two companies is a great way to create value."

With the addition of Knights, Hanes expects to be an even stronger growth partner for licensed and graphic apparel with more than $450 million in combined annualized sales. The combination will create a best-in-class supplier of licensed collegiate apparel that has both low-cost and quick-turn supply capability and is primarily supported by company-owned garment production and graphic embellishment facilities.

Founded in 2001, Knights has approximately 210 employees with primary offices and a distribution center located in Spartanburg, S.C. The company buys all of its apparel from outsourced contractors and sends those garments to outsourced embellishment facilities. The integration of the Knights business into Hanes' supply chain should yield significant savings and efficiencies.

"Knights Apparel has a tremendous business model and a highly talented team of employees," said John T. Marsh, HanesBrands group president, global activewear. "With Knights Apparel added to our existing Gear for Sports collegiate bookstore business, we are building a powerful licensed college apparel business that we can leverage with our substantial capabilities in apparel production, graphic design and graphic printing."

When the acquisition is closed, Knights Apparel CEO Joe Bozich will join Hanesbrands.

"HanesBrands is the perfect partner and owner for Knights Apparel," Bozich said. "The company understands our business and will make us more valuable to our licensor and retail partners, allowing us to provide best-in-class products, brand management and service."
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