Hanesbrands Inc. shares surged more than 37% on Tuesday after a Financial Times report said that Canada’s Gildan Activewear is close to acquiring the US underwear maker in a deal valued at nearly $5 billion, including debt.
The Financial Times, citing people familiar with the matter, said the companies are in advanced talks and could finalize terms by the end of the week.
However, there is no guarantee an agreement will be reached.
While shares of Hanesbrands rocketed, Gildan’s stock fell 8.5% to $46.62.
Hanesbrands entered the day with a market capitalization of just over $1.7 billion.
A deal amid market headwinds
Hanesbrands, the owner of the Hanes, Playtex, and Bonds brands, has been grappling with weak sales, lower orders from retail partners, and rising input costs linked to tariffs.
The company’s shares have fallen 41% this year, reflecting persistent pressure on its core business.
Despite these challenges, Hanesbrands last week posted second-quarter earnings that beat analyst expectations and raised its full-year outlook, citing stronger cost savings.
CEO Stephen Bratspies told analysts the company had balanced declines in its intimates line, including the Maidenform brand, with growth in basics, activewear, and newer categories such as scrubs and loungewear.
Activewear sales jumped nearly 30% in the second quarter, while the basics business posted low single-digit growth.
Still, Bratspies acknowledged that the US underwear market remains under strain from consumer headwinds.
Streamlining operations before potential sale
The North Carolina-based company has been reshaping its portfolio, notably selling its Champion sportswear brand to Authentic Brands Group for $1.2 billion last year.
The divestiture was part of an effort to focus on its core innerwear business and strengthen its balance sheet.
Earlier this year, Hanesbrands delivered a first-quarter turnaround, swinging to adjusted earnings of $0.07 per share compared with a loss a year earlier.
Net sales rose 2.1% year-over-year to $760 million, though they came in just below Wall Street estimates.
Gildan’s position and past challenges
Montreal-based Gildan Activewear, best known for its mass-market T-shirts, has been trading near record highs despite a turbulent year in corporate governance.
Last year, the entire board resigned, and CEO Vince Tyra stepped down following a prolonged proxy battle.
The potential acquisition of Hanesbrands would expand Gildan’s footprint in the global apparel market, adding well-known innerwear brands to its portfolio and potentially boosting scale efficiencies in production and distribution.
Neither company has commented on the reported talks.
The Financial Times report noted that while negotiations are advanced, any deal remains subject to final agreement.
If successful, the takeover could mark one of the largest apparel industry transactions in recent years, reshaping the competitive landscape for basics and innerwear.
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