ATLANTA — Delta Apparel Inc. moved decisively into the wholesaling arena Tuesday by agreeing to acquire branded activewear company M.J. Soffe Co. for about $72 million.
In a deal scheduled to close in September, Delta Apparel is expected to pay $52 million in cash including the retirement of debt, $8 million in promissory notes and up to $12 million in contingent payments.
The company also forecast lower sales and earnings for both the fourth quarter and fiscal year ended June 28.
Founded in 1946, privately held Soffe distributes its products through specialty sporting goods stores, department stores, college bookstores and the U.S. military. Delta Apparel is a vertically integrated manufacturer and marketer of knit apparel selling undecorated T-shirts, golf shirts and tank tops to screen printers, private label accounts and distributors.
The company said it expects the Soffe acquisition to add approximately $100 million in sales, similar to its revenues last year, to Delta Apparel and will increase per share earnings 60 to 80 cents a share in the first year of operations. Soffe will be operated as a wholly owned subsidiary of Delta, with Jim Soffe remaining chief executive officer of the unit and the current management staying in place.
Robert Humphreys, president and ceo of Delta Apparel, said, “The Soffe management team has done an outstanding job of building a profitable, branded activewear business. The addition of the Soffe business to Delta Apparel represents an exceptional opportunity to participate in four additional distinct channels of distribution for activewear products.”
He added that the manufacturing, distribution and marketing synergies between the companies will allow both operations to expand at a faster pace than if they were operated on a stand-alone basis.
Humphreys said basic commodity T-shirt pricing remained soft in the fourth quarter ended June 28, resulting in sales and operating income below expectations. It forecast sales of $36.8 million, with earnings per share between 34 cents and 39 cents, down from $43.4 million in sales and $1.93 in earnings per share in the year-ago quarter. The company idled its textile operations for a week during the quarter to help balance inventories. Average selling prices for the quarter were down about 10 percent from last year. Sales to distributors fell more than 50 percent and represented about 10 percent of Delta Apparel’s sales for the quarter, Humphreys said.
Delta Apparel said it expects year-end sales of $129.5 million with earnings per share in the range of $1.43 to $1.48. In the prior year, sales tallied $131.6 million as net income reached $2.84 a diluted share.