Gildan Activewear is expanding its East Coast U.S. manufacturing operation, bringing one of its current yarn suppliers under its own umbrella. A wholly owned subsidiary of the Montreal-based basic apparel producer and distributor acquired a 100 percent stake in Phoenix Sanford, LLC, the parent company of Frontier Yarns, in an all-cash deal totaling $168 million.
Frontier Yarns is based in Sanford, N.C., with two manufacturing plants in the town and another two facilities in Mayodan, N.C. The supplier produces materials such as 100 percent cotton, polyester and cotton blend yarns, primarily manufactured on open-end and vortex-spinning technology. Approximately 1,100 employees work across the four facilities, where the spinners produce an average of 2,800 metric tons per week.
“This acquisition is a testament to the trust Gildan places in our people, their expertise, and our operations and we see this combination as a strong and natural fit” said Robin Perkins, CEO of Frontier Yarns in a statement. “Having developed a long-standing relationship with Gildan over the years, we are excited for our employees given this new opportunity for collaboration and growth.”
With the acquisition, Gildan can build on its vertically integrated supply chain through further internalizing yarn production. The company already has yarn-spinning manufacturing facilities and other operations in three North Carolina towns: Mocksville, Eden and Salisbury.
In addition, the deal will support yarn availability for Gildan’s textile capacity expansion plans in Central America and the Caribbean.
Frontier, a U.S. Cotton Trust Protocol member, already has played a role in helping the apparel company scale in these regions. During 2021, approximately 40 percent of Frontier’s production was dedicated to yarn sold to Gildan for textile manufacturing in Central America and the Caribbean.
“As a long-time trusted yarn supplier of Gildan, with a dedicated and experienced workforce, we are delighted to welcome Frontier into the Gildan family” said Glenn Chamandy, president and CEO of Gildan. “In line with our business model of investing in global manufacturing, the acquisition of Frontier’s operations broadens and complements our existing yarn capabilities and provides additional yarn capacity to support long-term growth.”
In its third quarter, Gildan generated free cash flow of $232 million, bringing its year-to-date total to $478 million and giving it plenty of room for an acquisition. The period saw sales rise 33 percent to $802 million on a year-over-year basis, and sales 8 percent above 2019, with net earnings reaching $188 million. The record period has thus far shown that the manufacturer’s “Back to Basics” plan unveiled in February 2020 is working, with the company seeing higher unit sales of activewear and underwear.
Gildan markets its products in North America, Europe, Asia-Pacific and Latin America, under a diversified portfolio of company-owned brands, including Gildan, American Apparel, Comfort Colors, Gold Toe, Anvil and Peds. The vertically integrated manufacturer currently operates facilities in Honduras, Nicaragua, Haiti, the Dominican Republic, the U.S., and Bangladesh. The company is moving forward with construction of a new manufacturing facility in Bangladesh in 2022, with construction expected to be finished by 2023.
The basics apparel manufacturer’s move comes amid a push to get more product manufactured in the Western Hemisphere, both in the U.S. and in local Central American countries. For U.S. companies, Central America ranks highest on the list for future nearshore activities, according to a recent survey by McKinsey & Co. Roughly eight of 10 North American apparel players—nearly one-quarter of respondents based in the region—plan on increasing their company’s sourcing value share in Central America.
Another North Carolina-headquartered company, spun yarn and cotton manufacturer Parkdale Mills, recently unveiled it will make a multimillion-dollar investment in a new yarn spinning facility in Honduras and make an additional substantial investment to support existing operations in Hillsville, Va.
Vice President Kamala Harris unveiled the investment from Parkdale Mills and six other companies earlier this month, as part of the administration’s “Call to Action” to the private sector to promote economic opportunity in Central America.
Through October, the U.S. imported 2.3 million square meter equivalents under The Dominican Republic-Central America Free Trade Agreement, a 33.7 percent increase for the same period in 2020, according to the Commerce Department’s Office of Textiles & Apparel.