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Gildan makes move to acquire American Apparel brand

Lauretta Roberts
14 November 2016

Canada's Gildan Activewear has this morning announced its intention to acquire the brand and certain assets of stricken US brand American Apparel.

American Apparel has been once again placed into Chapter 11 banktuptcy, for the second time in a year, while the deal is being finalised.

For the cash sum of $66m Gildan will acquire the worldwide intellectual property rights related to the American Apparel brand and certain assets. Separately it will acquire inventory from American Apparel "to ensure a seamless supply of goods in the printwear channel while the Company integrates the brand within its Printwear business".

The deal, which is subject to approvals by the American Apparel bankruptcy process and customary conditions, will not include any retail store assets and is expected to complete in the first quarter of 2017. In a statement Gildan said the acquisition "would represent a strong complementary addition to the Company’s portfolio of brands".

"[It] will create revenue growth opportunities by leveraging Gildan’s extensive distribution network in North American and international printwear markets to further increase the brand’s penetration in the faster growing fashion basics segments of these markets. In addition, with American Apparel’s strong heritage as a consumer brand, the Company will evaluate potential wholesale opportunities for leveraging the brand within its Branded Apparel business," it said.

American Apparel voluntarily filed for Chapter 11 bankruptcy protection today. The Bankruptcy Court may require it to hold an auction for its assets and business under which the proposed acquisition by Gildan would constitute the initial bid. Completion of the acquisition would be subject to Gildan being selected as the successful bidder. If it is unsuccessful Gildan would be entitled to "a break-up fee and certain expense reimbursements".

Gildan's brand portfolio includes its own label Gildan, Anvil, Goldtoe, Secret, Silks, Kushy Foot, Therapy Plus and Peds. Its printwear division includes Gildan, Anvil, Comfort Colors, Alstyle and New Balance (which it produces under license).

American Apparel's UK business, which includes 13 stores, was placed into administration a week ago with KPMG appointed to handle the process. The UK business would not be part of the US deal and it is believed the UK stores will be traded through the Christmas period with a view to them being sold off separately afterwards.

The US business has endured a chequered past. It first entered Chapter 11 a year ago following a legal dispute with founder Dov Charney following allegations of misconduct including sexual harassment. Charney, who founded the business in 1989, was dismissed in 2014.

Charney's ethos has been to promote US manufacturing and ethical production practices; American Apparel products proudly displayed the Made in the USA label. While the approach initially worked, when young consumers tightened their belts as a result of economic downturn in 2008, the business suffered falling sales and debt.

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