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Lakeland signs LOI to buy Qualytextil S.A., Brazil
Feb '08
Lakeland Industries Inc a market leader in protective apparel, announced that it has signed a letter of intent to acquire Brazilian protective apparel supplier Qualytextil S.A., subject to the negotiation and execution of final documentation.

Qualytextil, based in Salvador Bahia, Brazil, was founded in 1999 and serves the Brazil Protective Clothing market in the following areas: firemen's turnout gear, conductive and electric arc garments, chemical protective garments, occupational, multilayer and waterproof operational garments, aluminized and molten metal lines of protective clothing.

Pursuant to the letter of intent, it is anticipated that, upon the signing of definitive documentation, the initial purchase price to be paid by Lakeland would be approximately USD$12.5 million.

The purchase price is also anticipated to include an earnout based on Qualytextil's 2010 EBITDA. The acquisition is expected to be accretive to Lakeland's earnings per share.

Adjusted Proforma EBITDA, as defined in the agreement, for the twelve months ended December 2007 is approximately USD$1.8 million. Sales for this period were approximately USD$9.8 million, with current gross margins of 50%.

Qualytextil is located in Salvador, Bahia, in the northeastern part of the country, where the State provides tax incentives, labor rates are favorable and is conveniently located to transport garments economically throughout the country.

Christopher Ryan, CEO of Lakeland, commented: "The Qualytextil acquisition in Brazil would allow Lakeland to expand worldwide in one of the ten most important emerging economies. Brazil is a new market which is rapidly increasing its GDP by about 5% per year.

Qualytextil has been operating in the market for 7 years, and can provide Lakeland with an in-house sales force of 20 employees and 28 outside sales representatives to cover the entire country, selling directly to the end user. Qualytextil is selling directly to the major state owned companies and agencies and the main oil and chemical companies in Brazil.

By selling direct, we can get better margins, and lead times will be shortened because we will first approach the companies that are buying direct, and be able to run through their testing trials faster than if an uneducated distributor is doing it.

Qualytextil also has a contract with Petrobras (Petroleo Brasileiro) a large Brazilian petroleum company to supply fire-retardant overalls through January 2010 and has a store located inside the Petrobras facility."

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