Confirming media speculation, Amer Sports announced a week ago that it has received a non-binding preliminary indication of interest from a consortium comprising Anta Sports Products and an Asian private equity firm, FountainVest Partners, in view of acquiring its entire share capital for €40.00 a share in cash. That would be equivalent to a total consideration of around €4.6 billion.

Anta, which has become the biggest Chinese sporting goods company, concentrating on categories such as running and basketball, is probably most interested in Amer's strong outdoor and winter sports business under leading brands such as Arc'teryx and Salomon. We hear that it was recently a candidate to the acquisition of Peak Performance, which was eventually taken over a few months ago by Amer (Compass Vol. 11 – 7+8 of April 30, 2018).

Besides the implied diversification of its product coverage, another major upside for Anta would be its access to important markets through Amer's global sales structure. While the current trade tensions between the U.S. and China make it difficult to predict the future accessibility of the U.S. market for its products, the potential is strong also in Europe for Anta, which generates almost all of its turnover in China. Conversely, Anta's firepower in its domestic market could be useful for Amer, whose total sales in the Asia-Pacific region represent only about 15 percent of the total turnover, although Arc'teryx is already well established in the premium segment of the Chinese market, and Salomon has been growing strongly there lately, even in segments like road running.

Nevertheless, some investors apparently feel at this stage that the transaction may not go through in the end. After a brief suspension on the Helsinki Stock Exchange after the announcement, the Finnish-based sports group saw its share price jump by more than 18 percent to €34.09, going way above a former 52-week high of €32.80. Short of matching the price offered by the Chinese investors, Amer's share price has not changed since then, closing yesterday at €34.10 and giving the company a value of €3.97 billion.

In contrast with Amer, Anta's stock price on the Hong Kong stock exchange was down slightly in early trading after the announcement. It went further down subsequently, closing yesterday at 34.30 Hong Kong dollars, which still gives it a stock market capitalization of HK$ 89.5 billion (€9.3bn-$10.8bn), much higher than that of Amer, Anta would probably have no problems in finding money for the transaction. Bloomberg has worked out that Anta had $1.5 billion of cash and equivalents at the end of June, but investors probably feel that the indicative price offered for Amer would be much too high to justify the expected benefits.

The indication of interest from the consortium came after Anta reported a buoyant performance for the first half of this year (see our previous issue) with a sales jump of 44.1 percent to 10.55 billion yuan renmimbi (€1.32bn-$1.52bn). The group's profit attributable to shareholders soared by 34.0 percent to RMB 1.94 billion (€247m-$280m).

Agreements with other brands have helped The Anta group has turned into the largest Chinese sports apparel and footwear brand, and it works the Chinese market with several others. It acquired brand rights for Fila in China nine years ago, and more recently sealed joint ventures to sell the Descente and Kolon brands in the same market. But Anta managers have made it clear in the last years that they were eager to complement their business through substantial international acquisitions. Several sources suggested that Anta previously sniffed at Puma, although this could not be substantiated.

The Amer group's winter sports equipment and apparel business could be particularly relevant for Anta, a partner of the Chinese Olympic Committee, which is eager to capitalize on the upcoming Winter Olympics to be held in Beijing in 2022. Salomon and Atomic are among the Amer Sports brands that stand to get plenty of exposure at these Olympics. Others could gain from increased Chinese interest in winter sports, such as Arc'teryx and Peak Performance.

Amer pointed out that it has not yet engaged in any negotiations with the consortium and that it has not made any decision in respect of its indication of interest. It noted that the prospective investors' project is subject to a number of conditions and that completion of the tender offer would be subject to further conditions.

Besides the endorsement by Amer's board of directors and by shareholders holding at least 90 percent of the shares, one of the conditions would be the availability of financing from identified sources. Another one would be the approval of the deal by the board of directors of Anta.

Created in 2007 and based in Hong Kong, Fountainvest is described as one of the largest private equity funds dedicated to China. It is led by one of its founders, Frank K. Tang, who started his investment banking career in the New York office of Goldman Sachs, a company where he worked for 11 years.

The expression of interest made by Anta and Fountainvest was made public only a few days after last Thursday's scheduled meeting between the management Amer Sports and financial analysts (see the following story).