The Possible Rip Curl Deal
A couple of readers were thoughtful enough to send me articles on the possible sale of Rip Curl. You can read them here and here. What’s intriguing from my perspective is that the offers came along at the same time as the conditional TPG offer for Billabong. As you know, that’s in due diligence right now, though there’s no certainty a deal will be made.
Rip Curl is a private company, but according to one of the articles it earned AUD 7.9 million in the year ended June 30, 2011 after making AUD 15.5 million for the year ended June 30, 2010. No numbers are given for the latest fiscal year results, but we do learn that, “During the 2012 financial year Rip Curl acquired 24 Rip Curl branded and multi-branded stores in Australia and South Africa.”
For all I know, Rip Curl had a spectacular fiscal 2012 and just thought it would be a good time to sell the company, but that seems unlikely given what we know about conditions in Australia. And if I were going to sell, I don’t think I’d look to do it at the same time a direct competitor was up for sale.
Anyway, just thought you might want to see these articles.
10X EBITDA? For a surf apparel brand? Right now? In this market? With all those company owned retail stores? No real business in the biggest global market (the USA)? Wow, I want some of what they are drinking (I don’t smoke, it’s bad for you ya know). I want to know who writes these articles? But I do find it very interesting and certainly would love to know how Warbrick & Singer held onto 72% of the business through all these years. That’s the story I want to read about!
Hi John,
Price looked a bit steep to me too. But remember, right now it’s all talk and means nothing until a deal closes. I also suspect, due to some of the reorganizing Rip Curl has done that the year ended June 30 2012 was not specifically too good.
J.
How did they hang onto 72% of the company and grow to the size levels they reached? That’s what baffles me. That’s the most impressive thing they’ve done.
John,
If their business isn’t too seasonal, and they have good support from suppliers, and have customers paying them fairly well, sometimes you don’t need to raise a whole bunch of capital. Check out the balance sheets of Zumiez and Buckles for example. Granted, it’s easier for a retailer. Also, we haven’t seen a balance sheet, so don’t know what kinds of debt it carries. Maybe it’s a lot of debt and that’s why they are for sale?
Thanks for the comment,
J.
Makes sense.