Peak Performance is to be acquired for about €255 million by the Amer Sports group, complementing the apparel offerings of Arc'teryx and Salomon with those of a more urban and women-oriented brand that has plenty of room to expand in international markets.
The Swedish brand of ski, outdoor, golf and fashion products is being divested by the IC Group, a Danish fashion company that has divested several other brands in the last years. Peak Performance is by far its largest remaining brand, with sales of 1,079 million Danish kroner (€144.8m-$174.9m) and earnings before interest and tax of about DKK 123 million (€16.5m-$19.9m) in the last 12 months.
The agreement is subject to customary conditions, and is anticipated to close at the end of June, which is the end of the Danish group's fiscal year. About 300 Peak Performance employees should then become part of the Amer Sports group.
Heikki Takala, the Finnish group's chief executive, said in a presentation for analysts that Peak Performance was complementary to its own brands, with a strong relevance in sports fashion, a full-year offering, and a significant share of sales in women's wear and in own retail sales.
A potential upside is that the Stockholm-based brand's business is focused on the Nordics and other European countries, meaning that it could take advantage of the Amer Sports group's infrastructure to take hold in other markets. Peak Performance pulled out of China and South Korea several years ago, and Takala referred to Japan and North America as two other large markets where the Swedish brand has little presence.
Takala said that Peak Performance's sales are divided almost equally between the three categories of ski and active wear, urban wear and sportswear, and basics and accessories. Women account for 43 percent of the turnover, against 57 percent for men.
Some 52 percent of the Swedish brand's turnover is generated by sales to about 1,200 wholesale accounts, while 29 percent comes from about 50 own retail stores, 10 percent from about 30 franchises stores, and the remaining 9 percent from online stores in about 15 countries.
Amer Sports added that the deal neatly fits with its target to surpass €1.5 billion in sales of softgoods. The group's sales in this category reached about €1 billion last year, up from under €300 million in 2010, and the acquisition raises the sum to €1.15 billion. Peak Performance should also raise the group's business-to-consumer sales to €320 million, up from €250 million last year, taking them closer to the mid-term target of €450 million.
The buyer anticipates that the deal will generate synergies of about €10 million in the next few years, about half of that through extra sales derived directly from group synergies, and the remainder through cost synergies. They should focus on sourcing and retail operations.
But beyond that, the group made it clear that it saw plenty of opportunities to increase Peak Performance's sales, not unlike Arc'teryx, which took on another dimension under the Finnish group's ownership. Amer Sports further pointed out that Peak Performance's profit margin is above the average for its existing apparel business.
IC Group announced back in October 2017 that it would study strategic options for Peak Performance. Its sales and profit margins have been boosted in recent years by strategic changes implemented under the leadership of Nicolas Warchalowski, previously chief executive at Haglöfs. The Danish company said that the next stage for the Swedish brand was faster international development, and it turned out that this could be supported most efficiently under the ownership of the Amer Sports group.
Peak Performance was launched in 1986 by Peter Blom, Chrsiter Mårtensson and Stefan Engström, a former professional downhill skier, as a resolutely technical skiing apparel brand. However, it later evolved into a mountain resort brand and then added ranges for golf and outdoor activities. The changes of the last years have added another focus on training and running apparel. The brand's concept stores were updated in recent years with a more urban, upmarket appeal, aligned with the brand's slick design and its more harmonized ranges.
Alexander Martensen-Larsen, the IC Group's chief executive, said it started approaching the market early this year, and a double-digit number of parties came forward. About one-third of them issued indicative offers and a handful proceeded further into the data room. Martensen-Larsen said that the group then received multiple binding offers. It found that Amer Sports offered a very strong fit and it was very satisfied with the agreed price. The net cash proceeds of DKK 1.7 billion to DKK 1.8 billion (about €240 million) are to paid out entirely as dividends when the deal closes, amounting to DKK 100 to DKK 105 per share.
Amer Sports indicates that all of Peak Performance's full-time employees are set to remain on board, including its management. Over a period of six to 12 months after the completion of the sale, IC Group will continue to provide support and service to Peak Performance on a cost-covered basis.
Amer Sports will finance the acquisition through its cash reserves and committed bank financing. The group said the deal should have a minor positive impact on its results for the full year, depending on the time of closing.
