10:40 AM EDT, 06/05/2024 (MT Newswires) -- Hanesbrands ( HBI ) said Wednesday that it agreed to sell its Champion athletic apparel brand to Authentic Brands Group in a deal that could be worth up to $1.5 billion.

The clothing company will sell the intellectual property and certain operating assets of the business to Authentic Brands, a brand management firm, for $1.2 billion. The transaction includes an additional cash consideration of up to $300 million if certain performance thresholds are met, Hanesbrands ( HBI ) said.

The deal, which requires approval from regulators, is expected to complete in the second half, according to the companies. Shares of Hanesbrands ( HBI ) gained 3.2% in Wednesday's trading session.

Hanesbrands ( HBI ) said the sale will allow it to focus on its global innerwear business. The company anticipates the deal to generate $900 million in net proceeds, which it aims to use to speed up its debt reduction efforts.

"Over the past three years, we have taken necessary actions to enhance the company's operations and financial performance," Hanesbrands ( HBI ) Chief Executive Steve Bratspies said. "The successful completion of this transaction further simplifies our business, deleverages our balance sheet and enhances the Company's operations and financial performance."

Hanesbrands ( HBI ) plans to classify the business as discontinued operations in its fiscal second quarter and thus update its full-year 2024 outlook when it discloses results. The company intends to provide certain "transition services" for Champion, including operating the brand in select regions for a period of time.

On a trailing 12-month basis, Champion recorded adjusted earnings before interest, taxes, depreciation and amortization of $75 million at the end of Hanesbrands' ( HBI ) first quarter, net of about $60 million of stranded costs. The company said it plans to remove all stranded costs within a year of the deal's completion.

Authentic Brands said the deal will expand its portfolio and boost its system-wide annual retail sales to more than $32 billion around the globe. The company, which owns consumer brands such as Reebok, Forever 21 and Ted Baker, will seek to covert the Champion business into a licensed model.

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