Hanesbrands to buy collegiate apparel-maker GearCo

Hanesbrands Inc., the maker of Playtex and Hanes underwear, agreed to acquire GearCo Inc. for $55 million to add sales of collegiate-logo apparel.

Hanesbrands will assume $170 million of debt and finance the acquisition of closely held GearCo with its 2010 free cash flow, according to a statement today. The acquired company, known as Gear for Sports, had revenue of $225 million in the 12 months through June, Hanesbrands said.

The transaction is Hanesbrands' first aimed at boosting revenue from finished products. It signals Chairman and Chief Executive Richard Noll's push to accelerate growth after cost cuts following the company's 2006 spinoff by Sara Lee Corp. Previous purchases were to add factory production in countries such as Honduras and El Salvador, where wages are less than those in the U.S.

Hanesbrands said it expects the transaction to boost earnings by 20 cents a share in the first year after closing. Profit may rise by 30 cents a share in the second year, the company said.

Hanesbrand will supply T-shirts and sweat shirts to GearCo more inexpensively than the prices GearCo currently pays, leading to cost savings, Noll told analysts today on a conference call. "That by itself easily justifies this deal," he said.

GearCo has sold Hanesbrands' Champion brand T-shirts, sweat shirts and sportswear embellished with logos of colleges, golf clubs and leisure resorts since 2001. GearCo, based in Lenexa, Kansas, pays Hanesbrands on royalty from Champion sales, said Matt Hall, a Hanesbrands spokesman.

Hall said the transaction was arranged without investment bankers.

The stock rose $1.28, or 4.9 percent, to $26.98 at 10:03 a.m. in New York Stock Exchange composite trading, after reaching $27.88 for its biggest intraday climb since Nov. 5. Until today, it had increased 6.6 percent this year.