Gildan Activewear Inc. is putting its best foot forward.
The Montreal-based clothing wholesaler has agreed to pay $350-million (U.S.) for Gold Toe Moretz Holdings Corp., a leading U.S. sock maker.
The company says the deal will more than double its revenue from socks sales and significantly expand and diversify its customer base and distribution channels in the United States.
This deal is by far the biggest acquisition for Gildan. It will transform the company into world's largest sock company, with retailers such as Kohl's, Sears, Target and J.C. Penney to add to existing customers such as Wal-Mart.
"This is by far the biggest and most strategic acquisition for Gildan," executive vice-president Laurence Sellyn said in an interview.
The proposed acquisition will also allow Gildan to further ramp up production at its second sock facility in Honduras, he said. And it further opens up the Asian market because Gold Toe Moretz sources most of its manufacturing from the region.
"The strengths of the two companies will allow for significant growth opportunities," Mr. Sellyn added.
Ever since its first sock acquisition five years ago, Gildan has been carving out a significant presence in the North American hosiery market as part of its bid to position itself as a major garment player, with a full product line of T-shirts, underwear, socks and sweatshirts.
The Gold Toe Moretz brands, which include Gold Toe, Silver Toe and PowerSox, are sold to mass-market retailers, national chains and sporting goods stores.
"The acquisition of Gold Toe Moretz represents an important and exciting step in Gildan's ongoing strategic development," Gildan president and chief executive officer Glenn Chamandy said in a news release.
The tie-up of the two companies should result in annual cost savings of between $10- and $15-million, to be attained over the next two years, Gildan said in a statement.
Gildan's extensive low-cost manufacturing base in the Caribbean and Central America gives the company a competitive edge in terms of price. The company has over the years expanded its operations in Honduras, the Dominican Republic, Nicaragua and Haiti. It is also increasingly looking to growth in emerging markets in Asia.
The proposed deal was announced after stock markets closed Monday.