VF Corp. has announced a definitive agreement for the takeover of Icebreaker Holdings, the merino wool apparel specialist from New Zealand. The transaction should be completed early next year. The price of the acquisition has not been disclosed, but VF said that it will be immediately accretive.

Icebreaker will nicely complement VF's Smartwool brand, which also uses merino wool, leading to interesting synergies. Their focus on garments and accessories made with natural fibers – a fast-growing category which is underpenetrated, according to VF – is expected to promote the development of innovative and sustainable natural fiber products across its brand portfolio, especially in its outdoor and workwear brands.

Complementing its strength in the outdoor sector through brands such as The North Face and Timberland, VF recently expanded its workwear segment to about $1.7 billion a year by completing its acquisition of Dickies and its parent company, Williamson Dickie Manufacturing, for $820 million.

By joining VF's strong platform, Icebreaker is expected to access new markets and reach out to new consumers at an accelerated pace. Rob Fyfe, chairman of Icebreaker, says his company may now be in a position to double its turnover in the next five years by entering new markets where it has not been quite successful such as the U.S., Eastern Europe and Asia.

To achieve this, Icebreaker would only need to raise its annual growth rate from the current level of 12 percent to 16 percent, says Fyfe, while stressing that a business plan has yet to be drawn up.

Icebreaker had a turnover of about US$150 million in the last trailing 12 months, with more than 80 percent of that generated outside New Zealand. Direct-to-consumer sales make up about one-third of the total revenues. No information could be obtained about Icebreaker's profitability, but Fyfe says it's strong.

Icebreaker's shareholders decided to team up with VF, after fielding inquiries from a couple of dozen interested parties in a first stage, narrowing down their choices in the last few months.

No shareholder has a controlling interest in Icebreaker. The founder, Jeremy Moon, holds a stake of 33 percent. Another 38 percent is in the hands of two New Zealand companies, Pencarrow and Accident Compensation Corporation (ACC). We understand that Fyfe is still one of the minority shareholders, with a stake of 5 percent.

Icebreaker currently has a global staff of 340 full-time employees, one-third of them based in New Zealand. The company's ethically sourced products are sold in 47 countries through its own subsidiaries, its websites, its own stores and wholesale channels.

As we have reported, Icebreaker reorganized its European sales structure recently, turning a couple of distributors into agents and appointing a European sales manager, Udo Heyder, who happened to be previously the international sales manager of Smartwool (Compass Vol. 10, N° 13-14 if July 5, 2017). The company has also reorganized its North American operations early this year, bringing its former Canadian and U.S. operations under common management.

Icebreaker was founded by Moon in 1995, when he was only 24 years old. VF recalls that he set it up on the belief that “nature always has a better solution.” In addition to merino wool, Icebreaker uses plant-based fibers and recycled fibers.

Reportedly, Moon, the largest individual shareholder in the company, is expected to continue to be involved as brand ambassador and Fyfe will remain as Icebreaker's chairman, based in New Zealand.

Fyfe, a former chief executive of Air New Zealand, joined the company in 2012 to bring in more professionalism. Last June, Fyfe, who owned 5 percent of Icebreaker's shares at the time, left the position of CEO and was replaced by Greg Smith, who was running the company's business in Australia and New Zealand.

Barclays is acting as exclusive financial advisor to VF in the transaction, while Davis Polk & Wardwell LLP is acting as legal advisor.

For the VF group, the acquisition of Icebreaker is the first addition to its Outdoor & Action Sports Coalition since it bought Timberland in 2011. After a slowdown in the growth of the division, which represented nearly two-thirds of its total turnover last year, VF has been re-engineering its brand portfolio since Steve Rendle became the group's CEO at the beginning of this year.