Gap pays $150 million for Athleta

Gap Stores Inc. (NYSE: GPS) has agreed to acquire women's activewear clothier Athleta for $150 million in cash. In a press release announcing the deal, Gap said that "Founded 10 years ago, Athleta has evolved into a premier lifestyle brand, offering high quality apparel that is stylish and functional for a variety of sports, including yoga, running, skiing, snowboarding and surfing. Customers can purchase Athleta product online or through the company's catalog."

Gap plans to sell Athleta's products online through its recently introduced e-commerce platform that allows shoppers to combine orders from Gap, Old Navy, Banana Republic and Piperlime. A 2005 AllBusiness article pegged Athleta's annual sales at $28 million, and while that number is believed to have grown rapidly since then, Gap is likely paying a much higher price/sales multiple than the market currently affords its own stock.

What's interesting about this deal is that Gap has, historically, made very few acquisitions. Gap's last apparel acquisition was Banana Republic -- way back in 1983.

Investors should probably take some comfort in the fact that The Gap is not a serial acquirer with frequent writedowns. A once per quarter century acquisition is likely to be well thought out but it may also be indicative of continued weakness in the company's current brands.