Sep 22, 2008
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Gap to buy activewear brand Athleta for $150 mln

Sep 22, 2008

Athleta 2008

SAN FRANCISCO, Sept 22 (Reuters) - Gap Inc will buy Athleta Inc, the women's sports apparel brand, for $150 million in cash to capture a larger part of the growing women's activewear market in the United States, the company said on Monday.

Athleta sells clothes for 13 activities, including yoga, skiing, cycling and hiking, through catalogs and the Internet. Gap sells sweat pants, leggings and other casual cotton items, but does not have a true activewear business.

Gap spokeswoman Louise Callagy said Athleta complements the company's existing brands and will give it faster entry into the $31 billion women's activewear market than if Gap had to build the business from scratch. She said the purchase of Athleta was expected to close in the next few weeks.

Athleta, based in Petaluma, California, plans to circulate about 21 million catalogs this year compared with 13 million in 2007.

Gap Inc, based in San Francisco, operates Gap, Banana Republic and Old Navy stores.

The growing popularity of yoga and pilates has created new opportunities for apparel makers and retailers, from large players like Nike Inc to niche brands like prAna, which Liz Claiborne Inc sold earlier this year to a private equity firm.

Fast-growing Lululemon Athletica Inc posted a 48 percent rise in revenues in its most recent quarter. The company is known for yoga-inspired clothing it sells in its stores in the United States, Canada and Australia.

Stifel Nicolaus analyst Richard Jaffe called the athletic apparel segment a "compelling" merchandise category, citing successes at Lululemon, Under Armour Inc and a new yoga line from J Crew .

"We view this as a positive for Gap as the company can then leverage its existing online businesses (Gap, Old Navy, Banana Republic and Piperlime) to quickly grow Athleta ..." Jaffe wrote in a note.

Shares of Gap closed at $18.81, down 1.4 percent, or 27 cents on the New York Stock Exchange. (Reporting by Alexandria Sage, editing by Brad Dorfman/Jeffrey Benkoe)

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