Israel's Delta Buys a Maker of Victoria’s Secret Bras

Israeli company will pay nothing upfront for Hong- Kong-based Bogart but will cover debt and may make payment later

Eran Azran
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Kendall Jenner walks the runway at the 2018 Victoria's Secret Fashion Showת New York, November 8, 2018.
Kendall Jenner walks the runway at the 2018 Victoria's Secret Fashion Showת New York, November 8, 2018.Credit: ANGELA WEISS / AFP

Israel’s Delta Galil Industries on Monday took another step forward in its global acquisition drive with an agreement to buy Hong Kong’s Bogart Group, a maker of high-end bras, swim suits and other intimate apparel for brands such as Victoria’s Secret, Jockey and Hanes.

Bogart has seen its sales and profits drop off sharply this year after a liquidity crunch prevented the company from buying the materials it needs to make its products and delayed sales to customers. Nevertheless, Delta Galil CEO Isaac Dabah said the acquisition would help it achieve a long-sought goal of expanding his company’s presence in the bra category.

“This is a unique strategic opportunity, where I see great potential for Delta to leverage Bogart’s strong market position to further build its company, while also helping Delta’s business units expand to the next phase of growth,” he said in a statement.

Delata Galil shares were up 4.8% mid-afternoon Monday on the Tel Aviv Stock Exchange at 106.20 shekels ($29.62).

Using an innovative seamless apparel technology, Delta Galil designs and manufactures bras, intimate apparel for women; underwear for men and other products under its own brands and for leading brands around the world.

Under the agreement, Delta Galil will pay nothing up front to buy Bogart as well as two units -- Brunet, a leading lace manufacturer; and B&B, a leading padding manufacturer. But it will assume $105 million in debt, including a $26 million loan by Delta Galil itself.

In addition, Delta will pay Bogart’s shareholders money if Bogart reaches a benchmark in 2024 for earnings before interest, taxes, depreciation and amortization of at least $20 million, according to a statement Delta filed with the TASE.

If the minimum is met, Delta Galil will pay shareholders between 10% and 20% of Bogart’s value calculated as six times annual EBITDA after adjustments.

Meantime, to help with Bogart’s cash crunch, Delta Galil will provide $50 million – some of it even before the deal is completed at the starting of the third quarter – to fund current operations.

Founded in 1993, Bogart it is home of five specialized companies in different activities of the industry that employ in more than 10,700 persons.

The company had $230 million in consolidated sales in 2018, down from $232 million the year before, EBITDA fell to $12 million last year from $20 million in 2017. The company began experiencing a liquidity crunch in the second half of last year, which continued into 2019, Delta said.

Nevertheless, Delta Galil said it expected the deal to show a profit in the second half of this year and to be accretive to earnings in 2020.

Dabah has led Delta Galil through a series of acquisition in recent years, most prominently its 2016 of VF Industries of the United States for $120 million, which brought it the labels 7 For All Mankind, Ella Moss and Splendid. Last year it acquired the French maker of men’s underwear Eminence for 125 million euro ($141 million at current exchange rates).