Hampshire Group said it has signed an agreement to sell the stock of Rio Garment S.A. to a group led by the current Rio management, which includes David Gren, the president of Rio.
Hampshire signed a deal to sell its stake for $6 million and additionally it will receive the existing accounts receivable and certain other assets of Rio totaling to approximately $5.0 million.
Rio is a Honduras-based apparel manufacturer, designing, sourcing and manufacturing knit tops for men, women and children, which are sold to retailers and distributors, primarily in the US.
CEO of Hampshire Group Paul Buxbaum said, “Our sale of the Rio Garment business will provide significant liquidity to our operations, while materially reducing the working capital requirements.”
“This decision will strengthen our financial position and allow management to focus on growing the core business, which includes Dockers and new brands such as James Campbell,” he added.
According to a Hampshire press release, the total consideration includes $5.0 million of proceeds payable at closing, of which approximately $2.2 million will be paid to Hampshire’s lender.
The deal also includes $1.0 million of deferred proceeds that will be paid one year after the transaction’s closing date, less certain potential adjustments.
Hampshire Group will receive approximately $5.0 million of Rio’s receivables and certain other assets, of which up to approximately $4.2 million will be paid to Hampshire’s lender.
In total from this transaction, Hampshire expects to pay down its revolving credit facility by $6.4 million and retain total pre-tax cash proceeds of $4.6 million.
The apparel marketer anticipates the transaction will close before the end of April 2015, which is subject to the satisfaction of customary closing conditions.
“Results related to the Rio business will be recast for prior periods and reported as discontinued operations on the company's financial statements,” it too added.
Hampshire Group along with its wholly-owned subsidiary, Hampshire Brands is a marketer of fashion apparel across a broad range of product categories, channels of distribution and price points.
It specialises in designing and marketing men’s sportswear to department stores, chain stores and mass market retailers under licensed brands, its own proprietary brands and private labels of its customers.
