HanesBrands (asi/59528) has agreed to sell its Champion brand to Authentic Brands Group for $1.2 billion.

The deal had been in the works for months, but HanesBrands announced Wednesday, June 5, that an official agreement has been signed after the company’s board of directors approved the sale.

The transaction includes the Champion brand intellectual property and certain operating assets. HanesBrands could ultimately bring in a total of $1.5 billion from the sale of the sportswear line through an additional contingent cash consideration of up to $300 million based on the achievement of certain performance thresholds.

The deal is subject to customary closing conditions, which are expected to be tidied up in the second half of 2024.

“Following a thorough review of options for the global Champion business with the support of our financial and legal advisors, we are pleased to have reached this agreement with Authentic Brands Group that we believe maximizes value for Champion and best positions HanesBrands for long-term success,” said Bill Simon, chairman of the HanesBrands board.

HanesBrands anticipates net proceeds of $900 million from the Champion sale – money it plans to use to reduce debt. During a transition period, HanesBrands will provide certain continued services for Champion, including operating the business in select regions.  

HanesBrands CEO Steve Bratspies said the sale helps HanesBrands to simplify its business and to place more focus on its innerwear segment.

“As we begin the next chapter for HanesBrands,” Bratspies said, “we believe we’re in an even stronger position to further extend our leadership in innerwear, pursue new cost reduction opportunities as we ensure we have the right operating structure in place, and advance our multi-year flywheel to drive strong shareholder returns.”

Headquartered in New York City and private equity-owned, Authentic Brands Group’s portfolio includes Aeropostale, Bandolino, Billabong, Brooks Brothers, Eddie Bauer, IZOD and Van Heusen.

Winston-Salem, NC-headquartered HanesBrands announced in September that it was undertaking a strategic evaluation of its global Champion business, eventually determining to sell the iconic brand amid pressure from activist investor Barington Capital Group, which called on the clothing maker to slash costs and beef up cash as its financial performance weakened.

HanesBrands has been struggling and free-falling Champion sales have contributed to revenue and earnings woes for the publicly traded company. Across its entire global business, HanesBrands’ sales fell 17% year over year in the first quarter of 2024, while the apparel maker sustained a loss of $39.1 million, or -$0.11 per share. For full-year 2023, HanesBrands had a year-over-year sales decrease of nearly 10% and recorded a $17.7 million loss.

On a trailing 12-month basis as of the end of the first quarter 2024, the global Champion business generated approximately $75 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which is net of approximately $60 million of stranded costs. “The company has specific plans to remove all stranded costs within a year of the transaction closing as it completes the transition of the business,” HanesBrands noted.

With Champion no longer in its portfolio, HanesBrands' overall topline sales are likely to take a year-over-year hit in 2024. The apparel maker plans to provide an updated guidance for investors on what full-year sales will be when it releases its second quarter financial report over the summer.

Champion’s roots extend back to 1919 when it was founded in Rochester, NY, as Knickerbocker Knitting Company. The Sara Lee Corporation acquired Champion in 1989. HanesBrands was a publicly traded spin off company of Sara Lee that kept the Champion brand.