In a bold and strategic move, HanesBrands Inc. has officially completed the sale of its globally recognized Champion business to Authentic Brands Group (Authentic) for a whopping $1.2 billion. This transaction, finalized on September 30, 2024, is a key milestone in HanesBrands’ mission to simplify its business and focus on its core strengths. Let’s dive into the details of this game-changing deal and what it means for the future of HanesBrands and the iconic Champion brand.
The Deal Breakdown: What's Included
The $1.2 billion sale includes Champion’s intellectual property and various operating assets. But the potential value of this transaction could skyrocket to $1.5 billion. How? An additional $300 million in contingent cash may be earned if specific performance benchmarks are hit—adding a layer of excitement to this already massive deal.
From HanesBrands’ perspective, they’re walking away with approximately $900 million in net proceeds, after the usual transaction fees and working capital adjustments are accounted for. What’s next for that cash? HanesBrands has its sights set on debt reduction, aiming to pay down around $1 billion of debt by the close of 2024. It’s a financial reshuffle that sets the stage for future growth and stability.
“Today marks a major milestone on our journey to strengthen and simplify our business and is the culmination of a significant team effort to position HanesBrands on the optimal path for the future,” HanesBrands CEO Steve Bratspies said.
Why HanesBrands Sold Champion?
While Champion is a beloved name in apparel, HanesBrands is shifting its focus to optimize its business. This sale allows them to sharpen their attention on core products—namely, their innerwear brands. It’s a move designed to boost topline growth, expand margins, and accelerate earnings, which the company hopes will result in double-digit earnings per share growth.
CEO Steve Bratspies emphasized that HanesBrands is looking to future-proof its business, saying the sale of Champion allows the company to lean into what it does best. The result? A cleaner, more streamlined operation that’s primed to deliver strong shareholder returns over the coming years.
Transition Period: What Happens To Champion Now?
Though the deal is done, the transition period is far from over. HanesBrands will continue to provide transition services for Champion, even operating the brand in select regions for a limited time. This ensures a smooth handover to Authentic, while HanesBrands will also work to remove all costs tied to Champion within a year of the transaction.
Additionally, the sale will impact HanesBrands’ financial reporting. By the second quarter of 2024, Champion will be listed as discontinued operations. HanesBrands will update its full-year financial outlook accordingly.
Advisors Behind The HanesBrands Champion Sale
When it comes to navigating a major deal like the sale of Champion, having top-tier advisors is crucial. HanesBrands enlisted financial heavyweights Goldman Sachs & Co. LLC and Evercore to guide them through the $1.2 billion transaction. On the legal front, they turned to powerhouse law firms Kirkland & Ellis LLP and Jones Day, ensuring every legal and financial detail was meticulously handled.
This expert team played a pivotal role in ensuring the smooth execution of the deal, helping HanesBrands streamline its business and set the stage for future growth. With these trusted advisors steering the ship, HanesBrands secured the best possible outcome for the sale of its Champion brand.
What's Next For HanesBrands?
HanesBrands is focusing on its core strengths after the sale of Champion, setting its sights on growth in the innerwear market. By streamlining operations and cutting debt, the company is positioning itself for long-term success. Here’s what’s ahead for HanesBrands:
- Core Focus: The company will concentrate on its leading innerwear brands, leveraging its world-class supply chain.
- Debt Reduction: With proceeds from the Champion sale, HanesBrands aims to reduce its debt by approximately $1 billion by the end of 2024.
- Financial Growth: HanesBrands is targeting topline growth, margin expansion, and double-digit earnings per share growth, all while improving its balance sheet.
This strategic shift will help HanesBrands deliver strong shareholder returns and strengthen its leadership in the apparel industry.
The Takeaway
The sale of Champion marks a pivotal moment for HanesBrands as it refocuses on its core strengths and sets a clear path for future growth. By leveraging the $1.2 billion deal to reduce debt and streamline operations, HanesBrands is well-positioned to expand its innerwear business, boost financial performance, and deliver strong shareholder returns. This strategic move not only reshapes HanesBrands but also opens a new chapter for Champion under the ownership of Authentic Brands Group. Both brands are now primed for success in their respective markets, signaling exciting times ahead in the apparel industry.
