News / Canada

Bankruptcy court approves Gildan's US$88-million purchase of American Apparel

MONTREAL — Gildan Activewear's US$88-million purchase of California-based clothing company American Apparel was approved Thursday by a U.S. Bankruptcy Court judge.

The Montreal-based company won an auction Monday to acquire American Apparel's intellectual property rights and some manufacturing equipment from the L.A. facilities, but not the leases for the manufacturing or distribution centres.

It also doesn't include American Apparel's stores and e-commerce site, which will continue to have access to a limited licence for 100 days.

The deal is expected to close early next month.

Gildan (TSX:GIL) paid some US$22 million more than a stalking horse offer it made in November following several rounds of bidding against California-based apparel maker Next Level Apparel.

It will also pay about US$15 million for wholesale inventory.

Gildan's all-cash bid was deemed superior to Next Level's combination of cash and future royalty payments, said a court filing.

Founded by Quebec native Dov Charney in 1989, American Apparel rose to prominence after opening manufacturing facilities in Los Angeles and attracting a young clientele with the adoption of sexually provocative advertising.

However, it entered bankruptcy protection twice, in Oct. 2015 and then Nov. 2016, shortly after Charney was fired in 2014 for allegedly violating its sexual harassment policy, something he denied and described as a "coup.''

Gildan has yet to decide whether American Apparel products will continue to be made in the United States, but is expected to disclose more details about its integration plan during its Feb. 23 conference call discussing its full-year results.

Note to readers: This story corrects an earlier version that said Gildan will spend US$16 million for wholesale inventory.