MONTREAL—Gildan discusses the recent proposed acquisition of American Apparel. In a phone call with Printwear, Garry Bell, vice president of corporate marketing and communications at Gildan, explains what the move means for the company, and what the potential outcomes are.
While the proposal is still in its early stages, Bell says Gildan is “cautiously optimistic about what the possible upsides are.” The move to acquire American Apparel is one of many recent acquisitions for the company, but slightly more complicated because it is part of a bankruptcy proceeding. In addition, Gildan still needs to review American Apparel assets before it finalizes the transaction, a slightly inverted version of what other recent acquisitions by the company have looked like.
“We negotiated and arrived at an agreement on a specific collection of assets at a specific price without having seen the assets,” Bell explains.
The asset purchase agreement includes the American Apparel brand, the company’s distribution center, and two manufacturing facilities, all located in California. Equipment at all three facilities is also included in this agreement, as well as a portion of equipment in a third American Apparel manufacturing facility, the seven-story facility located in Los Angeles. Bell notes that through a stalking horse bid, Gildan is afforded the flexibility to assess the facilities and equipment and modify the asset list before finalizing the transaction. Retail stores are not part of Gildan’s purchase agreement, since the company operates a different model than American Apparel's direct-to-consumer design.
As mentioned in the original press release, the company projects the transaction to finalize in early 2017, and Bell points out that the evaluation process of the assets is “underway as we speak.” In the interim, current management at American Apparel continues to run the business and will do so until that time. Staff integration remains to be seen, and will be more of a case-by-case decision after the initial proposal is finalized, Bell says.
A major focus behind the acquisition is the homegrown, domestically-produced product American Apparel has cultivated, Bell explains.
“Part of the inherent value is their ‘Made in the U.S.A.’ base,” Bell says. “That’s a focus we intend on continuing.”
American Apparel’s domestic production also fits well within Gildan’s already-immense stateside production presence, Bell points out. Within the U.S., Gildan operates five yarn-spinning facilities, a hosiery facility, a garment-dyeing facility, and is the largest domestic consumer of American cotton.
“(American Apparel) has been an active brand in the promotional apparel market for years,” Bell states, pointing out that the opportunity exists to offer American Apparel in 50 countries across the globe alongside Gildan’s other brand lines.
To maintain what Gildan hopes to be a seamless transition, Bell states that the company has already ordered blank T-shirts from American Apparel to cover the interim period until the anticipated early 2017 transaction closing.
“As we look at this acquisition, we realize we’re heading into the busy selling season,” says Bell. “Having that continuity of supply is critical to being successful after an acquisition.”
The proposed acquisition is the latest in major announcements for Gildan in 2016. In May, the company acquired Alstyle Apparel for $110 million and more recently acquired the Quebec-based Peds Legwear.
For more information, visit: www.gildan.com