Delta Galil Sets Purchase of Germany’s Schiesser

Acquisition to elevate brand share, European presence.

In a move that bolsters its men’s and branded businesses, as well as its presence in Europe, Tel Aviv-based Delta Galil Industries Ltd. has agreed to acquire Schiesser AG, a leading manufacturer and marketer of men’s, women’s and children’s underwear for the German market, for about 68 million euros, or $90 million at current exchange.

This story first appeared in the May 3, 2012 issue of WWD.  Subscribe Today.

The acquisition, expected to be completed in July, will lift the buyer’s sales to about $900 million, Isaac Dabah, chief executive officer of Delta Galil, told WWD.

Schiesser, based in Radolfzell, Germany, commands the leading market share for men’s underwear, about 26 percent, in the German market and respective shares of about 15 and 25 percent in women’s and children’s underwear, according to Dabah. It also distributes its products in such northern European markets as Belgium, the Netherlands, Switzerland and Austria, with plans to move into Russia and portions of eastern Europe in the near future. Sales last year were 132 million euros, or about $174 million, about three-quarters in Germany and about 70 percent through wholesale volume. About 60 percent of sales are in men’s, 25 percent in women’s and 15 percent in children’s.

“Schiesser fits Delta like a glove,” Dabah said. “We bought the leading brand in the best economy in Europe. The purchase covers every one of our strategic criteria when we look at acquisitions.”

The purchase will add a heavily branded component to Delta, which has historically been dependent on private label sales of underwear, shapewear and activewear. The branded portion of Delta’s business will move to about 47 percent from the current level of 33 percent.

“There’s a lot of synergy here,” Dabah said. “They have retail and we have retail and they’re a leading brand while we’re predominantly private label. We can help with bras, a category they don’t currently do.”

Under the Delta umbrella, Schiesser will operate as a wholly owned business under the existing management team, headed by Rudolf Bündgen, ceo. “With Delta Galil, we gain a worldwide operating owner, with whom we can enter new foreign markets more consistently and who will further support us in our marketing and distribution strategy,” he said, adding that expansion of Schiesser’s product line is being planned.

With the addition of Schiesser, Delta’s European sales will grow to 40 percent of the total from 24 percent, and men’s, roughly 13 percent now, will expand to 23 percent.

The German firm, founded in 1875, became insolvent in 2009, when, according to Dabah, two operating subsidiaries faced difficulties. The purchase, funded primarily through cash and cash equivalents, was negotiated over a two-and-a-half-year period with the firm’s trustees. Schiesser distributes its products through leading department stores and about 5,000 specialty stores in Germany and nearby countries.

“Schiesser’s core business has been consistently profitable and the combination will be accretive to Delta Galil’s earnings,” the ceo said. “We see many opportunities to expand Schiesser through product innovation, enhanced distribution and logistics, and development of retail stores and e-commerce activities.”

Late in 2011, Delta Galil negotiated to buy the jeanswear division of The Jones Group Inc. for between $350 million and $400 million but talks broke off without an agreement. Dabah sold Gloria Vanderbilt Apparel Corp. to Jones in 2002 and stayed on to head its jeans operations before his 2004 departure. GMM Capital LLC, controlled by Dabah, owns the majority of Delta Galil’s stock.

In trading on the Tel Aviv Stock Exchange following the Wednesday morning announcement of the deal, shares of Delta Galil shot up 6 percent to 32.62 Israeli new shekels, or $8.64 at current exchange.