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Delta Galil acquires leading German innerwear brand
May '12
Delta Galil Industries Ltd, the global manufacturer and marketer of branded and private label apparel products for men, women and children, has signed a definitive agreement to acquire Schiesser AG, the leading underwear manufacturer and marketer in Germany, for a purchase price of €68 million (approximately US$90 million).

The deal will expand Delta Galil's global market reach and its leadership in intimate apparel, particularly in branded products. With the addition of Schiesser, Delta Galil will have total sales of approximately US$900 million and its branded business will grow to about 47% of sales from some 33% at present. The transaction is expected to be accretive to Delta Galil's earnings per share beginning in 2012.

In addition to the Schiesser brands, Delta Galil will receive at closing estimated working capital of approximately €40 million (approximately US$53 million), and Schiesser's cash on hand at closing is estimated at about €11 million (approximately US$14.6 million). Delta Galil is financing the transaction with internally generated resources including cash and equivalents.

Schiesser has the no.1 brand awareness in the underwear category in Germany, and holds the top market share in the men's segment and solid shares in the women's and children's segments. The company has been known for quality products since 1875 and had sales of €132 million (approximately US$184 million) in 2011.

“By category, Schiesser's sales consist of approximately 60% Men's, 25% Women's and 15% Children's. Its products are primarily sold under the Schiesser brand, as well as Schiesser-Uncover, a youth-oriented line, and Schiesser-Revival, a trendy retro collection. Retail channels include department stores, specialty stores, and increasingly company-owned retail stores.

“In addition to Germany, which remains the strongest economy in Europe, key markets for Schiesser brands include Belgium, Netherlands, Switzerland, Austria and Italy, and the company has targeted Russia and Eastern Europe for potential expansion. Its Schiesser-Revival brand is sold in some high fashion specialty retailers in selected US markets.

Some 75% of Schiesser's sales are in Germany. In addition to its own retail and outlet stores, Schiesser sells to all major German department stores and about 5,000 specialty stores in Germany and other European markets. Wholesale business accounts for approximately 70% of Schiesser's total sales, with Retail at 30%.

Isaac Dabah, CEO of Delta Galil Industries, stated, “This is an important transaction that will allow us to make solid progress against many of our strategic goals and will drive further shareholder value. It enables us to grow the branded side of Delta Galil's business by adding the top underwear brand in Germany, with a reputation for quality established over 137 years.

“The combination with Schiesser also expands our global reach with a solid position inGermany – the most vibrant market in Europe – and a base for expansion in other potentially lucrative markets. Following the acquisition, about 40% of our sales will come from Europe, up from 24% now, and the potential for future growth is exciting. Our Men's category will grow to 23% of our sales from roughly 13%. The acquired business is also well diversified across various retail segments and Schiesser's own stores.”

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