Rip Curl acquisition takes Kathmandu into summer

The Kathmandu acquisition of Rip Curl ensures the iconic brand remains in Australasian ownership and strengthens and significantly broadens the global reach of the purchaser’s wholesale and retail business.

Inside Retail Weekly predicted the acquisition exclusively in December 2017 after the struggling Billabong was acquired by the owners of Quiksilver.

IRW reported that the most likely remaining buyers for Rip Curl were Kathmandu, a transnational company with its headquarters in Christchurch, NZ, or Super Retail Group which has consolidated its retail leisure and sports brands to BCF, Macpac and Rebel.

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Courted by Billabong

Billabong had been mulling over buying Rip Curl as part of a strategy to stabilise its flagging business, a deal that realistically was never possible given Billabong’s parlous financial position and need to reduce rather than take on more debt.

Rip Curl owners were keen to sell in 2017 and even as far back as 2012 but were caught in the wash of the financial struggles of both Billabong, which was listed on the Australian Securities Exchange, and Quiksilver, which had publicly listed in New York but was in trouble.

Billabong directors thought a merger with Rip Curl might help ride out difficult trading conditions in the US and Europe, but the company was not in a position to get close to the asking price or, for that matter, to develop a clear strategy to satisfy backers that it could make a merger work.

The California-based Boardriders gained acceptances of more than 75 per cent of the Billabong shareholders in November 2017 on a bid of just $1.05 per share, with the alternative likely to be wipeout for the iconic brand.

The offer was a long way below the $13 share price for Billabong in 2011 when it was riding high and looking to further expand globally through acquisitions.

Boardriders already owned Quiksilver, which had started out alongside Rip Curl in Torquay, near Geelong, Victoria, but had unsuccessfully pursued international growth via a listing on the New York Stock Exchange.

Quiksilver filed for bankruptcy in 2015 after eight years of accumulated losses and was subsequently acquired by Boardriders with private equity backing.

Founders accept $350m

Two years ago, Rip Curl’s founders and major shareholders, Brian Singer and Doug Warbrick, had been looking for $400 million-plus for the business they started in 1969 but have accepted a $350 million cash-and-share offer from Kathmandu.

They had valued the business at $500 million in 2012, but of course the original price tag didn’t attract a buyer, and more recent assessments of the prospect of an ASX listing indicated it was unlikely the $400 million return was ever achievable.

Indeed, despite the improved trading performance of Kathmandu under current CEO Xavier Simonet and the apparent benefits to the retailer of the acquisition, institutional shareholders did not take up their full entitlement on a one-for-four share issue capital raising to fund the purchase.

Michael Daly, Rip Curl’s CEO, who will continue in that role under the new ownership, has pointed to the strong parallels with both Rip Curl and Kathmandu in product, marketing and distribution channels.

The acquisition will give the combined group a global footprint of 341 owned retail stores as well as  254 licensed stores and more than 7300 wholesale accounts but importantly will balance Kathmandu’s stronger winter and outdoor portfolio with Rip Curl’s stronger summer and beach merchandise.

Kathmandu also gains a strategic platform for international expansion leveraging off Rip Curl’s presence in North America, Southeast Asia, Europe and Brazil.

“The acquisition of Rip Curl transforms Kathmandu into a NZ$1 billion outdoor and action sports company, anchored by two iconic global Australasian brands,” Simonet said.

Revenue to double

Kathmandu will virtually double its annual revenue, with Rip Curl adding around $455 million in revenue and chipping in $49 million in earnings before interest, tax and depreciation before the realisation of synergies that could create operational savings.

Kathmandu shareholders, which include New Zealand retailer Briscoe Group, gave formal approval to the acquisition at a meeting on October 18, ensuring a marriage of two iconic Australasian retail brands with solid growth potential in global markets.

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