Ennis Inc., Midlothian, Texas, announced yesterday the pending sale of its apparel division.
On Friday, Ennis Inc. entered into a unit purchase agreement with Alstyle Operations LLC to sell Alstyle Apparel and its subsidiaries, which constitute Ennis Inc.’s apparel division, to the buyer for an aggregate purchase price of $88 million.
The purchase price includes $76 million in cash to be paid at closing, subject to working capital adjustments, and an additional $12 million to be paid pursuant to a capital lease covering certain Ennis Inc. retained equipment utilized by the apparel division. The two parties expect the transaction to close by the end of this month.
As part of the transaction and following the closing, Ennis Inc. will provide transition assistance to Alstyle Operations LLC for certain administrative, financial, human resource and information technology matters for up to 18 months, and will sublease a portion of a certain property located in Anaheim, Calif., that is leased by Ennis Inc.’s apparel division.
“Given our strategic direction to focus on the further expansion of our print segment, the apparel segment was deemed to be a non-core asset,” said Keith Walters, chairman, CEO and president of Ennis Inc. “The sale of this non-core asset allows us to fully focus on our core business segment and to be able to utilize the cash from the sale of Alstyle Apparel to further expand this business segment through strategic acquisitions, through which we have been able to continually demonstrate excellent returns to our shareholders.”
Irshad Ahmad, now-former vice president of Ennis Inc’s apparel division and chief technology officer, has agreed to be a part of Alstyle Operations LLC and continue to serve as an employee of the apparel division following the closing of the transaction. Effective April 1, Ahmad no longer serves as an officer of Ennis Inc., and the company has transferred his employment, and his amended and restated executive employment agreement to A and G Inc., a subsidiary of Alstyle Apparel.
Though Ennis Inc. has not yet issued its audited financial results for its fiscal year ended Feb. 29, 2016, it has announced its preliminary financial results with respect to the quarter and year ended Feb. 29, 2016.
Based on available information, and on a preliminary and unaudited basis, and assuming that the transaction is complete on April 29, Ennis Inc. anticipates that it will incur a pre-tax loss on the sale of Alstyle Apparel of between $73 million and $79 million. Based on certain tax elections expected to be made, Ennis Inc. expects to be able to treat the loss as an operating loss for tax purposes.