Salomon gets $5.5 Billion Bid by Anta Sports

[ScotsSkier]

Why is the IP worth that kind of premium? Is it because the acquirer thinks they can dramatically increase sales to China with the acquisition?

Yes, just think of it as buying the R&D and know how and being able to put it straight into production. Avoid the " Salomon boot" syndrome where you spend 10 years and billions of $ just to realize that the 4 buckle overlap is still the way to go. Plus you get the marketing " premium" brand cachet of MH and MS

 

[DanishRider]

DIng DIng! We have a winner. I suspect quite straightforward. Basically buying the IP, worth the premium. Move production for Asia and the home market to china. Keep a European foothold as an either way bet to circumvent tariffs from the US. And of cours ramp up the investment in soft goods - footwear and clothing - to drive growth. And of course as with so many Chinese acquisitions the financial model is not necessarily the same as we would normally expect for a pubPic company

I am fairly confident, that their top-of-the-line skiis will still be produced where they are being produced today locally. The cheaper skiis are already outsourced today, so not much difference there i guess The cheap ski made in China, will probably be used mainly for the home market in China, to be affordable for the chinese - Just my guess

 

[Tricia]

Amer purchased Armada in spring of 2017
In these stories, I'm not seeing mention of Armada. Not sure why it stood out for me, but it did.

 

[Wasatchman]

Yes, just think of it as buying the R&D and know how and being able to put it straight into production. Avoid the " Salomon boot" syndrome where you spend 10 years and billions of $ just to realize that the 4 buckle overlap is still the way to go. Plus you get the marketing " premium" brand cachet of MH and MS

Fair enough. Jist that 40 percent premium seems sizeable. Especially given some of the busts that have occurred. Quicksilver lost their butts buying Rossignol and Newell recently sold K2 for well well below what predecessor company Jarden paid. And you'd still have to worry if sporting goods category could ever get Amazoned.

I really don't know the business or Amer that well though which is why I asked.

 

[Wasatchman]

Amer purchased Armada in spring of 2017
In these stories, I'm not seeing mention of Armada. Not sure why it stood out for me, but it did.

Good point about Armada. Don't think Armada is mentioned because it is less than a blip to overall Amer. It will be something like a $5 billion acquisition and Amer paid something like $4 million for Armada a few years ago. We're all of course so focused on the ski part but does anyone know what percentage of Amer is actually related to skiing?

 

[Cheizz]

Good point about Armada. Don't think Armada is mentioned because it is less than a blip to overall Amer. It will be something like a $5 billion acquisition and Amer paid something like $4 million for Armada a few years ago. We're all of course so focused on the ski part but does anyone know what percentage of Amer is actually related to skiing?

Download complete Annual report 2017 here: https://www.amersports.com/investors/reports-and-presentations/financial-reviews/

"Wintersports equipment" sales in 2017 was 414million Euro. That's about 15% of total Amer Sports Sales (source: Financial report 2017, p. 9).

 

[cantunamunch]

I am fairly confident, that their top-of-the-line skiis will still be produced where they are being produced today locally. The cheaper skiis are already outsourced today, so not much difference there i guess The cheap ski made in China, will probably be used mainly for the home market in China, to be affordable for the chinese - Just my guess

Don't underestimate how vastly different the concepts of IP, know-how, and exclusivity are within China itself. I strongly suspect we will see in-country tech sharing agreements on a huge scale. Agreements that include brands already sold in export markets. Imagine Alex rims getting Mavic expertise.

 

[ScotsSkier]

Also probably an attempted hedge against tariffs and source of origin requirements. May want to try to " launder " product through EU to US market in the event china does not get a favorable trade deal.

 

[cantunamunch]

Oh, absolutely.

I am also seeing a gate for cheap knock-offs into undeveloped markets. Imagine unbranded copies of Solly bindings sold into India.

 

[Muleski]

Interesting stuff. Good posts.

I took a look at the North American Amer Sports website the other day. Was familiar with most of the brands. Interested to see that each brand has a dedicated headquarters; looks like in their original country of origin. So, Atomic in Austria, Solomon in France, Wilson in Chicago, etc. Made me think that if one wanted to break off or spin off some brands, it might be very doable. Also made me think of just how hands off the Amer leadership likely is.

So, I’m always curious about roll-up deals and just how they shake out in terms of how many layers stay. No insight as to how this will work. Could be any number of ways, I imagine.

Corporate HQ is now in Finland. North American HQ is in Ogden, UT as we know. I’m reasonably sure that USA is largely sales, marketing, distribution and service of the products sold in this country. The distribution center {aka warehouse} is actually in TN. Always thought that was interesting to see skis shipping from TN. I believe it was driven by many pluses..tax incentives etc., as I recall.

The website also details where product is manufactured. The majority is produced in China and the Far East. I think the number for “The America’s” is 12%?

This will be interesting. It sounds like there will likely be no plan to take the current lineup downmarket, at least in North America. I doubt if as consumers it will impact us much.

Worldwide, and particularly in China, we should see a lot of activity. The growth of the sport there is huge. I have two close friends who are big in the snowmaking business and they are evaluating a few options for serving that market. Likely a production facility or two. They are incredibly busy there.

Thanks for comments about the value of the IP, and the resulting pricing of the offer. Very informative. So much of that had not dawned on me.

Thanks.

 

[DanishRider]

Don't underestimate how vastly different the concepts of IP, know-how, and exclusivity are within China itself. I strongly suspect we will see in-country tech sharing agreements on a huge scale. Agreements that include brands already sold in export markets. Imagine Alex rims getting Mavic expertise.

True - i was thinking more along the line of their race-ski departments

 

[DanoT]

I think this is all about the Chinese expecting a significant growth in downhill and cross country skiing as well as summer sports activities in China and this sales growth in China justifies and eventually pays for the premium acquisition price.

Nice to see China buying technologies instead of stealing them.