In a major diversification move that surprised several observers, Asics Corporation announced that it has reached an agreement to buy 100 percent of the shares of Haglöfs Holding, the leading Swedish brand of outdoor products. After multiple discussions with Ratos AB, which has owned Haglöfs since 2001, Asics’ board of directors gave the final nod today to the transaction, whose price commands a high premium.
The Japanese company, which has become a leader in the running shoe sector, pointed out in a statement that the outdoor segment is growing and that it meets the demands of the customers of all three of Asics’ main business segments: athletics, health/comfort and sports lifestyle. In this segment, Haglöfs appeals to high-level participants in outdoor activities, providing good-quality, functional products, Asics said.
The price of the takeover has been set at about 1,000 million Swedish kronor (€106m-$133.3m), which will mean a net exit gain for Ratos of about SEK 765 million (€81m-$102m) and an average annual return of about 30 percent. The Söderberg family and related foundations are the major shareholders of Ratos, with a stake of about 35 percent.
The price is equal to about 20 times net income, 15 times operating profit before amortization (Ebitda) and 1.4 times revenues, indicating that Asics sees very strong potential for the development of Haglöfs’ business. For 2009, Haglöfs had consolidated sales of SEK 590 million (€62.6m-$78.7m), up from SEK 495 million the year before. Its Ebitda reached SEK 65 million (€6.9m-$8.7m), while net income grew by 25 percent to SEK 48 million (€5.1m-$6.4m).
Asics’ consolidated sales fell by 7.3 percent to 224.4 billion yen (€2.05bn-$2.50bn) for the fiscal year ended March 31, largely due to currencies. Its European sales fell by 13.3 percent to 55.4 billion yen (€505.8m-$618.2m), but improved by 1.9 percent in local currencies. Asics overtook last year Puma as the third-largest athletic footwear brand in the world after the Nike and Adidas groups, with a market share of 5.7 percent, according to the international branded athletic footwear chart just released by our sister publication, Sporting Goods Intelligence.
Founded in 1949, 35 years after Haglöfs, the Japanese company has more than 5,350 employees worldwide. Like Haglöfs, it enjoys a premium positioning in the market. Asics says it “perfectly matches with our corporate philosophy to pursue and own products that create value for customers.”
Haglöfs’ purchase is part of Asics’ medium-term global expansion plan, called the Asics Challenge Plan 2010. Among other things, this business plan calls for expanding the brand’s relatively small apparel business by introducing functional, high-quality products while continuing to grow its core running business.
Mergers and acquisitions are both possibilities for growth, according to this plan, and the takeover of Haglöfs could be of benefit to Asics’ expansion in the apparel sector.
Asics says it expects synergies with Haglöfs in areas such as management, technology, know-how, production bases and sales channels. Officials of both companies declined to be more specific about these synergies for the moment (more perhaps on this in the next issue during the OutDoor show), but indicated that Haglöfs will preserve a high level of independence.
The purchase should be completed in mid-August, and is subject to the approval of competition authorities. Asics expects that the impact of this acquisition on the results for its fiscal year ending March 31, 2011 will be minor.
Starting with backpacks in 1914, Haglöfs has been gradually expanding into other categories such as clothing and footwear, and clothing now represents about 70 percent of the total turnover. Likewise, the company has been gradually expanding its reach into other European countries, using recently a step-by-step approach to set up foreign sales subsidiaries.
Sales outside Sweden represented 74 percent of the turnover in 2008 and 77 percent in 2009. Based in Avesta, Sweden, the company sells its products in 17 European countries as well as Japan, and has about 120 employees. It has subsidiaries in Denmark, Finland, Norway, Germany (covering also the Austrian market) and the U.K.