American Apparel's 'made in U.S.' heritage uncertain after deal

Tue Jan 10, 2017 6:24pm EST
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By Allison Lampert and Jessica DiNapoli

MONTREAL/NEW YORK (Reuters) - American Apparel LLC's made-in-the-U.S. heritage is uncertain after Canadian apparel maker Gildan Activewear Inc (GIL.TO: Quote) won a bankruptcy auction to acquire the edgy fashion retailer for about $88 million in cash.

Gildan said on Tuesday it will buy manufacturing equipment and intellectual property rights related to American Apparel, but the Canadian company did not assume the leases of the retailer's California manufacturing plants, fueling questions over where the clothing will be produced.

Reuters reported late on Monday that Gildan had won the auction, which also attracted bidders such as California-based apparel maker Next Level Apparel and had garnered interest from Inc (AMZN.O: Quote) and Forever 21 Inc.

Gildan's stalking-horse bid of $66 million for American Apparel, an offer that set the floor for competing bidders, included an option to acquire the company's manufacturing operations. Gildan had planned to maintain some operations as recently as last week, but then reversed course.

Garry Bell, a Gildan spokesman, said the company would decide where to make the clothing when it completes its integration plan.

"We felt it was best to not assume these leases while we worked through that plan,” he said, adding details will be outlined Feb. 23.

American Apparel had insisted in the weeks leading up to its bankruptcy and auction that any deal would keep its manufacturing plants in the United States. On Tuesday, a spokeswoman said that "the manufacturing facilities were always a part of negotiations, and any decision by the buyer to not assume these operations is at their discretion."

Gildan, which manufactures yarn in North Carolina and Georgia, has no "apprehension about investing in the United States," Bell said.   Continued...

The American Apparel factory headquarters is pictured in Los Angeles, California July 7, 2014. REUTERS/Jonathan Alcorn