Delta Galil Industries has signed a definitive agreement to acquire Schiesser AG, the leading underwear manufacturer and marketer in Germany, for a purchase price of Euros 68 million (approximately US$90 million).

The deal is expected to expand Delta Galil's global market reach and its leadership in intimate apparel, particularly in branded products. With the addition of Schiesser, Delta Galil will have total sales of approximately US$900 million and its branded business will grow to about 47% of sales from approximately 33% at present.

Schiesser is said to have number one brand awareness in the underwear category in Germany, and holds the top market share in the men's segment and solid shares in the women's and children's segments. The company has been known for quality products since 1875 and had sales of Euros 132 million (approximately US$184 million) in 2011.

By category, Schiesser's sales consist of approximately 60% Men's, 25% Women's and 15% Children's. Its products are primarily sold under the Schiesser brand, as well as Schiesser-Uncover, a youth-oriented line, and Schiesser-Revival, a trendy retro collection.

Retail channels include department stores, specialty stores, and increasingly company-owned retail stores. In addition to Germany, key markets for Schiesser brands include Belgium, Netherlands, Switzerland, Austria and Italy, and the company has targeted Russia and Eastern Europe for potential expansion. Its Schiesser-Revival brand is sold in some high fashion specialty retailers in selected US markets.

Approximately 75% of Schiesser's sales are in Germany. In addition to its own retail and outlet stores, Schiesser sells to all major German department stores and about 5,000 specialty stores in Germany and other European markets. Wholesale business accounts for approximately 70% of Schiesser's total sales, with Retail at 30%.

Isaac Dabah, CEO of Delta Galil Industries, stated, "This is an important transaction that will allow us to make solid progress against many of our strategic goals and will drive further shareholder value. It enables us to grow the branded side of Delta Galil's business by adding the top underwear brand in Germany, with a reputation for quality established over 137 years."

"The combination with Schiesser also expands our global reach with a solid position in Germany - the most vibrant market in Europe - and a base for expansion in other potentially lucrative markets."

"Following the acquisition, about 40% of our sales will come from Europe, up from 24% now, and the potential for future growth is exciting. Our Men's category will grow to 23% of our sales from roughly 13%. The acquired business is also well diversified across various retail segments and Schiesser's own stores."

"The financial benefits to Delta Galil are also very significant," Mr. Dabah noted. "Schiesser's core business has been consistently profitable and the combination will be accretive to Delta Galil's earnings. Schiesser has an efficient supply chain structure and an extremely loyal and stable customer base. Schiesser's brand portfolio and operations are a perfect fit with the business model that we have applied successfully in Israel, and we are excited about extending this model to a much larger European market. We see many opportunities to expand Schiesser through product innovation, enhanced distribution and logistics, and development of retail stores and e-commerce activities."

Schiesser, a privately-held company headquartered in Radolfzell, Germany, will operate as a separate wholly owned business unit of Delta Galil under its existing management team.

Rudolf Bündgen, CEO of Schiesser AG, commented, "Since we operate in the same industry, Delta Galil is well known to us. We have a similar product and quality philosophy. With Delta Galil, we gain a worldwide operating owner, with whom we can enter new foreign markets more consistently and who will further support us in our marketing and distribution strategy. Likewise, Delta Galil has a lot of experience in intimate apparel, activewear and shapewear, as well as socks. Under the Schiesser brand, we can envision additional product categories."

The transaction is expected to be concluded in July 2012.

Delta Galil Industries is a global manufacturer and marketer of branded and private label apparel products for men, women and children. Since its inception in 1975, the Company has continually strived to create products that follow a body-before-fabric philosophy, placing equal emphasis on comfort, aesthetics and quality.

Delta Galil develops innovative seamless apparel including bras, shapewear and socks; intimate apparel for women; extensive lines of underwear for men; babywear, activewear, sleepwear, and leisurewear.