Gildan Activewear signs deal to buy American Apparel brand for $66 million

MONTREAL – Gildan Activewear has signed a deal to acquire the American Apparel brand which filed for bankruptcy protection on Monday for the second time in just over a year.

The Montreal-based maker of T-shirts, activewear, socks and underwear said it has agreed to buy the intellectual property rights related to American Apparel for US$66 million.

The agreement does not include American Apparel’s retail store assets.

“We believe it’s a good opportunity for us to acquire another brand … and enhance our product offering both on the printwear side as well as the consumer or retail side of our branded apparel business,” vice-president Garry Bell said in an interview.

American Apparel filed for Chapter 11 bankruptcy protection on Monday, unable to find its footing even after a contentious fight for control with founder Dov Charney.

It filed for court protection from creditors in October 2015, about a year after it fired Charney for violating its sexual harassment policy. Charney’s legal campaign to retake control of the company was rejected by a bankruptcy court judge in January.

Charney denies the sexual harassment charges and has claimed the company was taken from him in a “coup.”

American Apparel, which has lost money every year since 2010, had about US$185 million of wholesale sales globally as of 2014, including US$168 million from the U.S.

Gildan’s offer Monday includes two manufacturing facilities, equipment and a distribution centre in California. However, Gildan can remove them from its offer after conducting due diligence, leaving it with just the purchase of rights to the American Apparel brand.

Gildan’s offer is a stalking horse bid, a floor which others could try to surpass possibly at an auction that would likely take place this year. The company is entitled to a break fee and some expenses if the offer isn’t accepted.

Bell said Gildan plans to maintain the American Apparel focus as a label made in the United States, but hasn’t yet determined where the products would be made.

Analyst Keith Howlett of Desjardins Capital Markets sees Gildan maintaining signature American Apparel products in Los Angeles and shifting other products to facilities in its factories in Central America or Mexico.

Analyst Derek Dley of Canaccord Genuity said Gildan would use its large North American and international distribution network to extend American Apparel’s presence in the fashion basics segment of the printwear market.

“In our view, American Apparel represents a nice extension of Gildan’s current fashion basics offering, with American Apparel viewed as more of a premium brand within the fashion basics market,” he wrote in a report.

— With files from The Associated Press.