Gildan to Buy Hanesbrands for $2.2 Billion

Gildan Activewear Inc. agreed to buy US underwear maker Hanesbrands Inc. — aiming to double its annual sales — for about $2.2 billion in cash and stock.

Montreal-based Gildan is offering Hanesbrands holders roughly $6 a share, based on the companies’ closing prices on Aug. 11, representing a premium of about 24% to the closing price on that date, according to a statement Wednesday. Including debt, the company’s largest deal ever values Hanesbrands at about $4.4 billion.

“With this transaction, our revenues will double and we achieve a scale that distinctly sets us apart,” Gildan’s Chief Executive Officer Glenn Chamandy said in the press release. The company is a global player in the cheap-clothing trade that churns out T-shirts and socks for the likes of Walmart Inc. and Nike Inc. and under its own brands, including American Apparel.

Analysts expect Gildan’s annual revenue to rise to about 5% to $3.4 billion this year. Meanwhile, Wall Street projections call for Hanesbrands to increase sales less than 1% to $3.5 billion in the same period.

Shares in Hanesbrands rose about 6% to $6.57 at 10:01 a.m. in New York, after gaining 28% on Tuesday following reports on the deal. Gildan surged 12%.

The transaction targets synergies of at least $200 million within three years, according to the statement, and to be at least 20% accretive to Gildan’s earnings per share. Hanesbrands’ shareholders would own about 19.9% of Gildan’s shares on a non-diluted basis after the closing of the transaction.

The transaction is expected to close before the end of next year’s first quarter. At that point, Gildan will review the potential sale of the HanesBrands Australia business.

“The core Hanes business is underwear, socks, t-shirts and sweatshirts. It’s everything that we do,” Chamandy told analysts during a conference call. “They’re running the exact same processes with the exact same types of equipment. So this is a really complimentary acquisition from all aspects.”

Stifel analyst Martin Landry agrees with sales being complementary, but doesn’t see “innerwear as an appealing category given it is mature and growing slowly,” he said in a note to clients. “While the financial merits of the transaction are clear, the strategic merits are more debatable, in our view. Most of Hanesbrands’ brands are not growing and appear tired.”

From a US tariff standpoint, since much the companies’ production happens in Central America and Asia, Chamandy said that Gildan and Hanes are “the largest consumer of US cotton probably, period.” “I think the capacity, strategically located geographically, will continue to reduce the impact on tariffs.”

The deal adds to a flurry of multibillion-dollar transactions that are helping to make this summer one of the busiest ever for M&A bankers. At the current run-rate, global deal values could hit $1 trillion in the third quarter for only the second time on record, data compiled by Bloomberg show.

A potential acquisition of Hanesbrands had been among the points of contention in 2023 between Chamandy and the company’s board. Chamandy was ousted over concerns that Gildan would accumulate too much debt, putting the company in jeopardy. He was ultimately reinstated to his role and won a high-profile proxy fight with shareholder backing in May 2024.

The lead activist shareholder during the debacle, Browning West LP, said in an emailed statement that “the strategic and economic rationale of the Gildan-Hanesbrands combination is very sound.” The Los Angeles-based investment firm didn’t include mergers and acquisitions in its strategic growth plan developed to bring back Chamandy.

Gildan reaffirmed its annual revenue and earnings per share guidance in the acquisition announcement. It also announced a three-year outlook through 2028, which includes integrating Hanesbrands, that calls for net sales to gain at a compound annual rate of 3% to 5%.

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