Gildan wins American Apparel auction with S$126 million bid: source

Canadian apparel maker Gildan Activewear won a bankruptcy auction to buy US fashion retailer American Apparel for about $88 million in cash.VIDEO: REUTERS

NEW YORK (REUTERS) - Canadian apparel maker Gildan Activewear has won a bankruptcy auction for United States fashion retailer American Apparel after raising its offer to around US$88 million (S$126 million), a person familiar with the matter said Monday.

Gildan will not take any of American Apparel's stores, but will own its brand and assume some of its manufacturing operations, the source said. The deal is subject to a bankruptcy judge approving it on Thursday, the source added.

American Apparel declined to comment, while Gildan did not immediately respond to a request for comment. The source asked not to be identified because details of the bankruptcy auction are confidential.

The auction for the retailer, famous for its sexually-charged advertising, also attracted an offer from California-based apparel maker Next Level Apparel, a source said earlier on Monday. However, Gildan won after raising its original US$66 million stalking horse bid, the source added.

The bankruptcy auction also attracted interest from e-commerce giant, competitor Forever 21 and brand licensor Authentic Brands Group, which led a consortium to acquire Aeropostale out of its bankruptcy last year, sources said last week.

American Apparel's struggles show the major challenges facing brick-and-mortar retailers as more consumers shop online.

Gildan plans to assume ownership of American Apparel's manufacturing plants in southern California, one of the largest garment-making operations in the United States with about 3,500 employees, sources have previously said.

The bulk of Gildan's manufacturing takes place in the Caribbean and Central America.

American Apparel filed its second Chapter 11 in November with about US$177 million in debt after the failure of a turnaround plan implemented by its owners, a group of former bondholders. The company filed its first Chapter 11 in October 2015, and emerged early last year.