Looks Like Amer Sports is Going Private

Back in October, there was some speculation that somebody wanted to buy Amer Sports and Amer said, “Yup, it’s true.  We’re talking.”  I wrote a short article about it at the time.

On December 7th, they confirmed that there is, in fact, a cooperative tender offer coming beginning around December 20thHere’s the link to the press release on the subject.  At that time, a tender offer document with full information will be available.

The cash price will be 40 Euros per outstanding share, valuing Amer Sports at 4.6 billion Euros.  The financing is already arranged.

The offer is being made by Mascot Bidco Oy, a company formed for the purpose of acquiring the shares.

“ANTA Sports Products Limited, FV Fund (an investment vehicle managed by FountainVest Partners), Anamered Investments (an investment vehicle owned by Mr. Chip Wilson) and Tencent (investing through Tencent SPV as a limited partner in FV Fund) …” are the entities funding the purchase.  Chip Wilson, we all know, is the founder of lululemon.

Here’s a summary of the stated rationale for the deal from the press release.  We’ll learn more when tender offer document comes out.

  •  The Investor Consortium intends to invest significant time, resources and effort in helping Amer Sports to accelerate several important ongoing and new strategic initiatives under private ownership, including expanding Amer Sports’ businesses in the Chinese market.
  •  This includes investing capital and resources in product development and human talent on a global basis to provide Amer Sports’ existing management team and employees with the optimal platform from which to implement its medium- to long-term strategic plans. In doing so, Amer Sports will not only grow into a broader platform for Amer Sports’ employees to thrive on, but will also form stronger, mutually beneficial partnerships with all its stakeholders.
  •  The Investor Consortium intends to provide Amer Sports with access to ANTA Sports’ extensive distribution network, R&D resources and manufacturing and sourcing capabilities in China, such that Amer Sports will have a significant opportunity to accelerate the expansion of its businesses in the Chinese market.
  •  After the completion of the Tender Offer, the Investor Consortium plans for Amer Sports to be operated independently from ANTA Sports, with a separate Board of Directors. The Investor Consortium has invited Mr. Heikki Takala (President and CEO of Amer Sports) and his key executives to continue leading the business. Under the new ownership, Amer Sports’ management team would have the autonomy to execute on its business plan under the strategic direction of the Board of Directors.
  •  The completion of the Tender Offer is not expected to have an immediate material effect on the operations, assets, the position of the management or employees or the business locations of Amer Sports.
  •  The Investor Consortium currently expects to retain Amer Sports’ corporate head office in Helsinki after the completion of the Tender Offer.

In recent years, we’ve seen more and more public companies end up private.  The argument I’ve been making is that the current business environment is easier to address as a private company.  The required focus on organizational flexibility, expense control, brand building, controlled distribution and reacting to, rather than leading your customer- all of which can tend to sacrifice the top line for the bottom line- is just easier to accomplish as a private company that doesn’t have to explain itself to the stock markets.

I can’t say that’s the only thing happening here, but I’m pretty sure it’s a consideration.  We’ll find out more when we get additional information in a week or so.

Somebody Wants to Buy Amer Sports

Back on September 11, due to some speculation in the media, Amer Sports confirmed that it had “…received a non-binding preliminary indication of interest…from a consortium comprising ANTA Sports Products Limited and the Asian private equity firm FountainVest Partners…” to buy all of Amer Sports’ shares at a cash price of forty Euros per share.

Here’s a link to the Amer Sports web site.  The brands the company owns include, among others, Salomon, Arc’teryx, Armada and Atomic.

ANTA describes itself as follows:

“Established in 1994 and listed on the Main Board of Hong Kong Stock Exchange in 2007, ANTA Sports Products Limited (stock code: 2020.HK) is the leading sportswear companies in China. Up to Nov. 2016,ANTA’s market value was summed up to USD 7.39 Billion.”

“For many years, we have been principally engaged in the design, development, manufacturing and marketing of ANTA sportswear series to provide professional sporting goods to the mass market.”

“In recent years, we have started moving full steam ahead with the strategy of “Single-focus, Multi-brand, and Omni-channel” to deepen our footprint in the sportswear market.”

The ANTA web site can be found here.   They are a public Chinese company with reported 2017 revenue of 16.7 billion renminbi (about US$ 2.4 billion at the current exchange rate).

ANTA’s purchasing partner FountainVest “…FountainVest is a leading private equity firm investing in companies that benefit from China’s growth, now managing total assets over US$4.5 billion…Our investment strategy has consistently focused on businesses that benefit from the secular growing needs and rising aspirations of the expanding Chinese middle class. While we are a generalist fund that invests across sectors, we have strong experience in areas of healthcare, consumer retail, media & entertainment and lifestyle. Our deal types are both control and growth capital oriented, with us having a high operational focus and a dedicated portfolio management team.”

And here is their web site if you want more information.

On October 11 Amer Sports, by press release, confirmed that there have been discussions between Amer Sports and the potential buyer “…to ascertain whether there is a basis to commence a more formal process to facilitate a possible recommended transaction.”  You can find the press releases here if you’re interested.

We are a long way from a deal, but they’re talking.  As of the end of June, Amer Sports had 116,517,285 shares outstanding.  The stock price closed at 33.89 Euros on October 12.  A purchase price of 40 Euros would represent a premium of 18% and an enterprises value of 4.66 billion Euros.    The stock price has risen from around 29 Euros since the September 11 announcement, with most of the increase coming at the time of the announcement.  It will get closer to 40 Euros if the market comes to believes a deal is more likely to happen.

A quick look at ANTA’s balance sheet leads me to believe they don’t have the financial capacity to pull off the deal alone, hence the involvement of FountainVest.

I don’t have any staggering insights on this transaction, but I hadn’t seen it mentioned and thought you’d be interested in knowing about it.  We are in an industry where it’s good to be big.

The Amer Sports Sale of Bonfire and Nikita

I thought I’d wait until I commented because I was hoping for some more details from Amer Sports. I asked them, but all I got was the comment you’ve seen from their interim report published on April 23rd.

“In March, Amer Sports divested Nikita and Bonfire brands to CRN Pte Ltd. The combined net sales of Nikita and Bonfire in 2014 was EUR 9.8 million. The divestment has no material impact on Amer Sports’ financial results.”

CRN is apparently a Singapore company, but a cursory internet search didn’t lead me any further information.

So why did they sell? Amer Sports 2014 revenues totaled EUR 2.229 billion. Nikita and Bonfire together, during the same period, had revenue of EUR 9.8 million. That’s less than one half of one percent of the total. O.44% to be exact.

Remember that Amer also owns Salomon. Salomon already owned Bonfire before Amer bought it. Nikita was acquired by Amer in 2011.

A reader of mine saved me some trouble and found the quote below from Amer when they bought Nikita.

“Amer sports acquired Nikita ehf, a snowboarding inspired action sports apparel brand which focuses on female consumers, on December 16, 2011. Annual net sales of Nikita is approximately Euro 8 million. Total purchase consideration was Euro 6.5 million, out of which Euro 1.6 million was allocated to Nikita’s trademark and Euro 3.3 million to goodwill. The acquisition of Nikita enables Amer sports to enter and invest into new business category where it had no strong presence in the past. As Nikita’s closing accounts at the date of the business combination have not been completed, the purchase price allocation is a draft and it will be finalized in 2012.”

You may recall that Nikita original tag line was “Street clothing for girls who ride.” I thought that was simply the best brand defining slogan I’d ever seen. I said that in one of my articles years ago. Then, having positioned the brand so well in the female riders market, they decided to make male clothing.

I guess that didn’t work out so well.

But what’s particularly interesting, as I’m sure you’ve noticed, is that Nikita was doing EUR 8 million at the time it was bought by Amer, but both Bonfire and Nikita had consolidated revenues of EUR 9.8 million in 2014. That implies quite a decline in either one or both brands.

I’m guessing Amer bought Nikita to be complimentary to Bonfire. But after investing some money and effort and not seeing results, they decided it wasn’t worth the trouble. I think they’re right.

Bonfire and Nikita are two brands I like and both have, or at least once had, solid market niches. I’d be curious to know just what happened and whether it was market or organization related.