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Lakeland signs LOI to buy Qualytextil S.A., Brazil

20 Feb '08

5 min read

"To operate in Brazil, it would benefit Lakeland to acquire its own sewing operation, which would give Lakeland a competitive advantage in these four (4) Mercosur markets of Brazil, Argentina, Paraguay and Uruguay, plus Venezuela as an associated member, increase its local and international sales, add to Lakeland's offerings a new fire-retardant and electric-arc flash product line.

Additionally, we will be able to access immediately 100 sewing employees and 20 in house salesmen to manufacture and sell our own complete line of disposable and chemical product lines at a competitive market cost and gain access to additional warehousing for Lakeland's product lines. Also we will have the immediate ability to a set up separate distribution channels selling direct to large international companies."

Mr. Ryan further commented: "We have laid out our growth strategy consistently for some time now as having three major focuses new products, international growth and acquisitions. This fits squarely into all three. We expect this transaction to be instrumental in building long term shareholder value."

Marcos Vieira, President of Qualytextil, commented: "Having Lakeland as our parent company will give us the resources we need to expand our business into other Latin American countries and new products.

Qualytextil can also provide Lakeland with a distribution channel to reach those small industrial areas spread throughout Brazil. Lakeland can add to Qualytextil existing product lines, its own product line in disposables and chemical garments, gloves, NFPA fire gear, reflective garments at reasonable costs.

The plant can also be used to warehouse Lakeland's products such as the chemical and cut resistant gloves, and other Lakeland products that may not be subject to high Mercosur import duties. We also share many of the same suppliers which should generate economies of scale in our purchasing."

The Mercosur Treaty was signed in 1994 by Argentina, Brazil, Paraguay and Uruguay. These countries established a common market, called "Common Market of the Southern Cone" (MERCOSUR). Today, Venezuela has become a new member and Chile and Peru are associate member countries with some reduced duty benefits, on a narrow line of products.

The treaty guarantees the free movement of goods, services and factors of production between countries through the elimination of customs duties and non-tariff restrictions on the movement of goods, and any other equivalent measures.

The transaction is still subject to confirmatory due diligence, execution of definitive legal documentation, regulatory and other third party approvals and such other conditions as may be contained in the Definitive Agreement of Purchase and Sale.

The companies are negotiating the terms of a Definitive Agreement of Purchase and Sale, but there is no assurance that these negotiations will result in a completed transaction. Assuming the execution of definitive documentation, the closing of the acquisition of Qualytextil is expected to occur at the end of April 2008.

Lakeland Industries Inc

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