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Leading apparel retailer, Hanesbrands Inc. (HBI - Analyst Report) has announced the takeover of the underwear apparel chain, Maidenform Brands Inc. , for approximately $575 million.

The buyout is in accordance with HBI’s acquisition strategy. Maidenform sells intimate apparel, which forms a core category of Hanesbrands.

The average-figure bra business of Maidenform targeting younger buyers complements Hanesbrands’ full-figure bra business targeting older women. Moreover, Maidenform’s popular shapewear category fits in very well with Hanesbrands established panty business.

The acquisition will bring Maidenform’s popular brands like Flexees, Lilyette, Self Expressions and Sweet Nothings and Hanebrands’ market leading brands like Playtex, Bali, Just My Size, Hanes, Barely There, Wonderbra, Champion and L’eggs under one banner.

However, the international operations of the two companies are limited and overlap only in Canada and Mexico. Both the companies have small businesses in Europe. Post the takeover, Hanesbrands plans to expand the Maidenform brands across the untapped Asian markets.

The deal, expected to close in the fourth quarter of 2013, will be funded by cash in hand and short-term borrowings on Hanesbrands’ revolving credit facility. However, the deal is subject to approval from Maidenform’s shareholders and regulatory authorities as well as completion of other formalities.

The Maidenform acquisition will enrich Hanesbrands’ existing portfolio and will allow it to offer tough competition to the likes of L Brands Inc.’s Victoria’s Secret, going forward.

The acquisition is expected to be accretive to Hanesbrands’ earnings in the first 12 months. Moreover, it is expected to generate additional revenue of $500 million, 60 cents in earnings per share, $80 million of operating profit and $65 million of free cash flow.

We believe that the acquisition synergy and the company’s endeavor to innovate continuously will keep Hanesbrands competitively ahead of its peers.

Currently, Hanesbrands has a Zacks Rank #1 (Strong Buy). Investors should consider also stocks such as Columbia Sportswear (COLM - Snapshot Report) and GAP Inc. (GPS - Analyst Report), all carrying a Zacks Rank #1 (Strong Buy).

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