Gildan Activewear Inc. is spicing up its image with a bid for American Apparel Inc., the racy and embattled purveyor of jerseys and tights.
If the tie-up succeeds, they'd be fashion's new odd couple.
How odd? For an answer, look no further than the companies' advertising strategies. American Apparel, which filed for bankruptcy protection this month, is known for racy ads featuring scantily clad teens and, more recently, for taking a stand on contentious social issues such as gay marriage. Compare that with Gildan's latest campaign, in which the Canadian company's pitchman derides the use of half-naked models to sell garments not meant to be seen in public.
"I'm Blake Shelton," the country-music and TV star says, "and I'm modeling underwear." He's fully dressed during the entire 30-second spot.
Montreal-based Gildan's $66 million offer is the only binding bid for American Apparel, which includes the brand and none of its retail outlets. Gildan spokesman Garry Bell said the bid also includes American Apparel's manufacturing assets, but that the company can withdraw any of them upon review.
While there are synergies between the two companies -- both are players in the $4.5 billion U.S. screen-printing industry and so-called basic looks are staples in their clothing lines -- how to merge the opposing corporate images will pose a major challenge.
"It's very hard to take on a brand that stood for something so outrageous," said Allen Adamson, the New York-based founder of consulting company BrandSimple and former North American chairman of branding firm Landor. "Once you dial it down, you're often left with nothing."
While there's a "natural alignment" on the screen-printing side, Bell said it's too early to discuss plans for American Apparel-branded products. The screen-printing unit, which competes with Hanesbrands and Fruit of the Loom and sells blank T-shirts and other items to wholesalers to customize, accounted for 60 percent of Gildan's $2.6 billion in revenue in 2015.
The acquisition may help the 30-year-old company, which has expanded into branded apparel and produces New Balance athletic shoes and Under Armour socks for retail stores, grow in the more fashionable and lucrative end of screen-printing.
"This is going to accelerate their growth strategy in the fashion basic segment," said Montreal-based Susan Da Sie, who helps manage $343 billion globally at Manulife Asset Management, which owns shares in Gildan. "The strategy of Gildan is to build low-cost capacity and sell more units, so this will fit nicely into their manufacturing footprint."
Gildan's experience courting millennials has been limited. It sponsors American college football via the New Mexico Bowl and made a one-off Super Bowl ad attempt before signing Shelton in 2015. American Apparel carries a much younger image and would come with marketing and branding expertise that Gildan doesn't have in-house, said Maureen Atkinson, a Toronto-based senior partner at global retail consultant J.C. Williams Group.
Gildan's shares have climbed about 9 percent since Nov. 11, the final trading day before its bid for the assets was made public. That compares with a 13 percent drop in 2016 before the disclosure.
Los Angeles-based American Apparel will keep trying to attract a better offer from a buyer willing to take on all of its assets, including its 110 U.S. locations, which is less than half the number the company ran in its heyday.
Chief Executive Officer Paula Schneider, who took over for ousted founder Dov Charney following accusations of sexual harassment, which Charney denied, tried to tone down the company's sexually charged advertisements that at times bordered on the pornographic. But Chief Restructuring Officer Mark Weinsten, in documents included in the latest bankruptcy filing, said the shift may have actually hurt the company.
American Apparel went from "brand to bland," said Erich Joachimsthaler, founder and CEO of New York-based brand-strategy firm Vivaldi Partners. "In branding, it is OK to be disliked. American Apparel needs to take a stand on something."
Information for this article was contributed by Eric Lam, Matt Townsend and Steven Church of Bloomberg News.
SundayMonday Business on 12/04/2016