US rag trade and knickers company HanesBrands has made a friendly $A1.1 billion bid ($US835 million) for Pacific Brands (PBG) in a deal that would take ownership of well known local brands such as Bonds, Holeproof and Sheridan offshore.
The offer, through a scheme of arrangement, was announced yesterday morning and follows months of secret negotiations between Pac Brands and HanesBrands, a US company which owns intimate apparel brands such as Playtex, Champion, Hanes, Maidenform and Loveable.
Hanes has offered to buy 100% of Pacific Brands shares for $1.15 a share, which is a multiple of 13.5 times 2015 earnings before interest tax depreciation and amortisation and 12 times 2016 EBITDA estimates.
The offer represents a 22% premium to Pacific Brands’ last closing price of 94c. PacBrands shares traded as high of $1.03 last month and yesterday the shares leapt nearly 23% to $1.155, as hedge funds got set for a bidding war, although it is hard to see who else would be interested.
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Pacific Brands proposes to pay a fully franked special dividend of 9.4c per share if the offer is successful.
HanesBrands’ cash offer will be cut by the amount of the special dividend, but the payout would potentially provide an additional 4c a share for shareholders who can capture franking credits, lifting the value of the total consideration to $1.19.
In the six months to december 31 last year, Pacific Brands earned a profit of $24.3 million, compared to a loss of $108.7 million in the same six months the year before, on an 8.6% increase in sales to $425.3 million.
Pacific Brands directors have unanimously recommended the transaction, subject to an independent expert’s report finding that the scheme is in the best interests of shareholders and there is no superior, competing proposal.
“We believe the 100 per cent cash proposal from HanesBrands is compelling and represents an attractive premium to our long term average share price and the implied financial year ’16 EV[enterprise value]/EBITDA [pre-tax/interest earnings] acquisition multiple of 12.0x compares favourably to the multiples paid in other comparable transactions,” Pacific Brands chairman Peter Bush said in yesterday’s statement from the company.
"The HanesBrands proposal represents an opportunity for Pacific Brands shareholders to realise attractive value for their shares and to de-risk future growth opportunities available to the business.
“HanesBrands has recognised the work done over the past two years that has seen the board and management team under CEO David Bortolussi’s leadership reshape and simplify the business to focus on our highest quality brands and improve operational performance,” Mr Bush said.
The bid follows seven years of restructuring at Pacific Brands, during which time the 101-year old company closed plants, shifted production to Asia, axed more than 1800 jobs and exited or sold more than 300 non-core brands. Senior executives including CEOs came and went and board membership at times resembled a revolving door.
HanesBrands is not interested in PacBrands’ Tontine and Dunlop flooring businesses and plans to sell them as soon as the scheme is completed.
If the scheme is rejected Pacific Brands intends to retain Tontine and Dunlop.
