Canadian apparel maker Gildan Activewear has confirmed that it won a bankruptcy auction to buy U.S. fashion retailer American Apparel for about $88 million in cash. Not yet a done deal, the matter – which will enable Gildan acquire American Apparel’s intellectual property rights and certain manufacturing equipment – is subject to approval from a bankruptcy court on Thursday.
Gildan - which beat out other reportedly interested parties, such as Forever 21 and Amazon - said on Tuesday it will buy manufacturing equipment and intellectual property rights related to American Apparel, but will not assume the leases of the company's California manufacturing plants, fueling questions over where the clothing will be produced.
Garry Bell, a Gildan spokesman, said the firm will decide where to make the clothing when it completes its integration plan for the brand. "We felt it was best to not assume these leases while we worked through that plan,” he said, adding details will be outlined February 23.
Gildan, which has yarn-spinning and distribution facilities in the United States and is the largest domestic consumer of U.S.-grown cotton, has no "apprehension about investing in the United States," Bell said.However, close to 90 percent of Gildan's 42,000 employees are in low-cost Caribbean and Central American countries, and the company does not manufacture clothes other than socks in the United States.
Famous for its racy advertising and history of financial and legal battles, American Apparel is one of the largest clothing manufacturers in the United States. The company filed its first bankruptcy last year due to a $300 million debt load, intense competition and excess inventory. It has also faced millions of dollars in legal liabilities stemming from former Chief Executive Dov Charney, who was ousted in 2014 over allegations of misconduct. He has denied the allegations.