Hampshire Group is gaining a foothold in Central America through its purchase of Rio Garment, a Honduras-based apparel manufacturer.

This story first appeared in the June 15, 2011 issue of WWD. Subscribe Today.

On Tuesday, Hampshire said it has entered into a definitive agreement to acquire Rio for $23 million, payable in up to $6.8 million in cash and $10.5 million in Hampshire stock, after the repayment in cash at closing of liabilities totaling about $5.7 million. This acquisition confirms a report posted on WWD.com on Tuesday morning.

The acquisition of Rio, which produces private label knit tops for men, women and children and had 2010 sales of $57 million, is expected to be accretive to Hampshire’s 2011 operating results. The purchase is expected to close in the third quarter, after which Hampshire will execute a stockholder rights agreement that will give the sellers the right to name two directors to Hampshire’s board. It is expected that Paul Buxbaum, chairman of the Buxbaum Group and majority owner of Rio, and Benjamin Yogel, managing director of MRC Capital Group and an investor in Rio, would then join the board.

Heath Golden, chief executive officer of Hampshire, said the purchase provides Hampshire with an entry into the Central American manufacturing community, which is growing in importance now that the situation in China is so volatile. “Unlike China, there is still a surplus of workers in Central America,” he said. “There is an infrastructure there and we can get the product to the U.S. in six days.”

Rio, whose largest customer is Aéropostale, will also boost Hampshire’s business within the specialty store channel. Right now, the company’s business is almost exclusively at department stores.

Under the terms of the deal, David Gren, general manager of Rio, and the firm’s entire senior management team will continue to manage the day-to-day operations of the company, and will now report Golden.

Marketing Management Group Inc. served as financial adviser and Willkie Farr & Gallagher LLP served as legal adviser to Hampshire in the deal.

This deal would be the first since Hampshire sold its women’s businesses to LF USA, a subsidiary of Hong Kong-based Li & Fung Ltd., and KBL Group International Ltd. last month.

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