MW HanesBrands is being bought out, but the stock is falling. Here's why.

By Tomi Kilgore

The buyout by Canada-based Gildan values HanesBrands stock at a discount, coming a day after the Financial Times reported that a deal was close

HanesBrands' stock falls as the buyout agreement with Gildan disappointed investors who were expecting more favorable terms.

Shares of HanesBrands Inc. were dropping in early Wednesday trading, as the buyout deal to which the manufacturer of Hanes T-shirts and other undergarments agreed underwhelmed investors.

The announced merger agreement with Canada-based Gildan Activewear Inc. $(GIL)$, whose brands include American Apparel, whose assets it took over in 2017, and the sock brand Goldtoe, comes a day after a report in the Financial Times that a deal was near had sent HanesBrands' stock $(HBI)$ soaring 28% on Tuesday, while Gildan's stock was falling 3.6%.

Investors were a little too optimistic, it turned out. The FT report said the deal could be valued at "close to" $5 billion, including debt. On Wednesday, the companies said the cash-and-stock deal had an enterprise value of about $4.4 billion, including debt, and effectively assigned an equity value to North Carolina-based HanesBrands of $2.2 billion.

HanesBrands shares sank 7.6% in premarket trading, while Gildan's stock dropped 0.8%.

Under terms of the deal, HanesBrands shareholders will get 0.102 Gildan shares and 80 cents in cash for each HanesBrands share they own.

If the deal were based on Monday's closing prices, before the FT report, it would value HanesBrands' stock at $6, a 24% premium.

Investors in acquirers don't typically like stock deals, because issuing new shares to pay for the deal results in the dilution of their holdings, meaning the percentage of the company they own declines.

Based on Tuesday's closing prices, the terms of the deal values HanesBrands stock at $5.81, a 6% discount. But with Gildan's stock falling even further on Wednesday, HanesBrands stock would be valued at $5.77 at current prices.

Still, the companies tried to sell the deal to investors, as the combined company will become one of the largest global apparel players by number of products sold, and will have a diversified offering of both outerwear and innerwear.

Cost savings of $200 million a year, from cutting out overlapping expenses, are said to be anticipated. The deal is expected to close in late 2025 or early 2026.

"We are very pleased to have reached this agreement with Gildan which delivers significant and certain value for our shareholders, both through immediate cash and substantial upside potential of the combined company," said HanesBrands Chairman Bill Simon.

HanesBrands' stock had dropped 24.1% in 2025 through Tuesday, while Gildan shares have gained 4.4%. The benchmark S&P 500 index SPX has advanced 9.6%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

August 13, 2025 08:02 ET (12:02 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.