Gildan Acquires American Apparel Brand Assets

As first reported Monday in a PPB Newslink Breaking News alert, supplier Gildan Activewear (UPIC: GILDA381) has entered into an asset purchase agreement to acquire worldwide intellectual property rights related to the American Apparel® (UPIC: AMER9421) brand and certain assets from American Apparel, LLC, for a cash purchase of approximately $66 million. American Apparel voluntarily filed for Chapter 11 bankruptcy protection on Monday.

Gildan is also purchasing inventory from American Apparel to make the brand’s integration into its printwear business seamless for customers. Garry Bell, Gildan’s vice president of corporate marketing and communications, says, “One of our primary concerns in this transaction, besides maintaining the heritage and brand value of American Apparel, is customers’ confidence that inventory will be available. Distributors should feel confident that we are making every effort possible to address this in our integration plans. The continuity of supply is key.”

American Apparel just emerged from Chapter 11 in February following a restructuring to reduce debt and expenses. The Wall Street Journal attributes the company’s return to bankruptcy to elements of that reorganization plan failing to pay off, including American Apparel’s failure to grow its online sales. While Gildan’s offer does not include American Apparel’s 110 retail locations, it does include an option to assume the leases of a distribution center and two manufacturing facilities in California.

“American Apparel is an iconic brand with a unique character,” says Bell. “It’s a well-rounded addition to our portfolio that we view as being complementary and additive. We fundamentally believe that the American Apparel brand is tied to its ‘Made In the USA’ heritage. That’s something we intend to maintain.”

The bankruptcy court may require American Apparel to hold an auction for its assets and business, under which Gildan’s proposed acquisition would constitute the initial bid. Consummation of the acquisition would be subject to Gildan being selected as the successful bidder in any such auction and bankruptcy court approval.

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