Investors of Pacific Brands should consider the probability of a rival bid to HanesBrands' $1.1 billion tilt as low, according to analysts at UBS.
The socks and jocks supplier this week announced it had agreed to the offer. Its board recommended shareholders accept, pending an independent expert's report and in the absence of a superior proposal.
But analysts at UBS, led by Jordan Rogers, don't assign a high probability to a bidding war breaking out for Pacific Brands.
"Given the significant potential synergies between HanesBrands and PBG, and the high implied takeover multiple, we would assign a relatively low probability of another potential offer exceeding the current $1.15 per share bid, but could not rule it out," he said in a report.
"Premier Investments is the only Australian listed apparel company that could acquire something of PBG's size and we estimate that it could generate 5 per cent EPS accretion by offering $1.20 per share and still keep Net Debt/EBITDA below 0.5 times."
But the analysts outlined that Premier would be more likely to continue to pursue its offshore growth in the Smiggle brand than make a counter offer for Pacific Brands.
"This EPS accretion is largely a function of increased leverage with some potential synergies in supply chain/store mix changes, and would likely involve at least partial scrip."
Pacific Brands chairman Peter Bush played has played down the prospect of a counter bid, even though Pacific Brands had been approached in the past few years by private equity firms, including KKR and TPG.
Both walked away after failing to agree with the board on value and being deterred by the size of the restructuring task.
UBS said it the current takeover was "likely to succeed" and the analysts aligned their price target with the bid price ($1.15ps). They also upgraded the firm's rating on Pacific Brands to "neutral".
Pacific Brands is being advised by Macquarie Capital and HanesBrands by Goldman Sachs and Baker & McKenzie. Grant Samuel has been appointed to prepare an independent experts report.
