Seamless manufacturer Tefron has announced it is raising $5.2 million to acquire the seamless activities of North American apparel manufacturer, Nouvelle Canada. Tefron also announced that it had entered into agreements to raise new capital.

In the first transaction, Tefron will acquire the seamless assets of Nouvelle Seamless Inc. (Nouvelle). Nouvelle is a private Canadian manufacturer of mass market seamless apparel which has established a strong position in both private label and branded products with broad distribution through leading U.S. retailers, including Walmart, Sears, TJMAXX, Avenue (United Retail Group), and others.

Separately, three investor groups will be investing an aggregate amount of $5.2 million in Tefron: the Lieberman family of Canada who are the controlling shareholders of Nouvelle, Shamir Insurance, and a group of investors led by the Rimon Investment Master Fund (Rimon Funds). These investments are subject to due diligence on the part of the investors, modifications to Tefron's bank financing arrangements and other conditions to closing, and there is no guarantee that the investors will invest all or any part of the $5.2 million.

In addition, Tefron is in advanced negotiations to modify its current financing agreement with its bank lenders, including to increase its credit and debt facilities with the banks by at least $5 million and to establish new financial covenants according to the company's business plan.

Commenting on the transactions, Tefron CEO Amit Meridor said, "These agreements have far-reaching implications for Tefron which took upon itself a challenge to regain its leading position in seamless apparel and performance apparel. Implementation of our turnaround program has succeeded in building an efficient and competitive cost structure, which is a vital component in executing the company's strategic plan going forward. The contemplated significant investment by the Lieberman family, Shamir Insurance and Rimon Funds will help to further solidify Tefron's financial strength and security. The acquisition of the Nouvelle activity, with its strong product offering to the mass market and its customer portfolio, complements Tefron's activity in the market and will strengthen Tefron's sales and marketing network in the U.S. market."

Chairman of the Board, Arnon Tiberg remarked, "The capital raising in Tefron of $5.2 million confirming the support and trust of new and existing investors, will enable the company to look ahead and focus on growth and long-term expansion."

In the agreement to acquire the operations and certain assets of Nouvelle in seamless activities, Tefron will acquire, inter alia, the Nouvelle customer list as well as the right to deal with those customers, reputation and goodwill, and existing and future work orders. Tefron will acquire these assets in exchange for 9.6% of Tefron's outstanding shares post-issuance.

Tefron will issue in the aggregate a number of new shares equal to 49% of its total outstanding Tefron shares following the issuance, to cover the acquisition of the Nouvelle operation, as well as for the $5.2 million dollar investment by the Lieberman family, Shamir Insurance, and Rimon Funds. Tefron will issue to Nouvelle 600,000 shares as consideration for the acquisition of the assets contemplated under the transaction. Under the agreements, the Lieberman family, the controlling shareholders in Nouvelle, is to invest $2.7 million, to acquire 20.5% of Tefron shares, increasing its holdings in Tefron to 30.2%, Shamir Insurance is to invest $ 1.3 million for a consideration of 9.9% of Tefron shares, and the investors group led by Rimon Funds are to invest a total of $1.2 million in exchange for 9.1% of the company shares.

The transaction is subject to fulfilment of conditions, including, inter alia, approval of the transaction at the special general shareholders meeting of the company by a special majority, and a modified financing arrangement with the banks. The company is in advanced stages of negotiations with the financing banks to increase its credit and debt facilities by at least $5 million and to determine new financial covenants to the satisfaction of new investors. The company is awaiting approval from the banks for these transactions, and there is no certainty that such authorization will be received. The company will provide updated information at the time of the signing of a final modified financing arrangement with its bank lenders.

The company intends to call for a shareholders meeting to approve the transactions. The invitation will include a description of the transactions, financial reports, and a Board report in relation to the acquired operations, as required by the Securities Regulations (Transaction between a Company and Controlling Shareholder) 2001 and Regulations (Private share offering in a listed company) 2000.