Black Diamond Inc. has sealed an agreement to take over Poc Sweden, a company that has grown rapidly in the last years with its distinctive ski helmets and other protective gear, ahead of a more recent diversification of its well-designed product line. Poc said that it would retain much of its independence, but the takeover will provide it with financing and distribution support to continue growing in the coming years.
Black Diamond, which already owns the Black Diamond and Gregory Mountain Equipment brands, has agreed to buy Poc for about $43.5 million in shares and cash. Black Diamond, which went public in 2010, will fund the transaction with 460,000 Black Diamond shares and about $40 million in cash, depending on the exchange rate of the Swedish kronor to the U.S. dollar at the time of closing. The stock to be issued for this purpose is subject to a lock-up agreement restricting its disposal over the next two years.
Black Diamond has also committed an additional amount of $12.5 million in long-term, performance-based incentives for Poc's managers, led by its founder and chief executive, Stefan Ytterborn. Structured as compensation, the incentives will be paid out over six and a half years, with several measurement dates. Managers held a stake of about 20 percent in Poc, while the remainder was scattered among three investors and a group of family and friends. The transaction is expected to be closed later this month, and to be accretive to Black Diamond's earnings per share as of next year.
Established eight years ago in Stockholm, Poc reached a turnover of nearly SEK 148.4 million (€16.7m-$20.9m) for the fiscal year until the end of April. This was an increase of 34.7 percent, in spite of the unfavorable weather in the winter, and it marked Poc's first year with net profits.
Black Diamond and Poc explained that there was an almost uncanny fit between the two companies, which both supply active customers with reliable and sometimes life-saving technical equipment. A multiple-award-winning brand, Poc had previously been approached by several other parties, but Ytterborn opted in favor of Black Diamond after a visit to its head office and product development facilities in Salt Lake City. The acquisition fits with Black Diamond's strategy of building up a group of like-minded outdoor brands, with synergies in terms of development as well as business culture and marketing approach.
About 22 percent of POC's turnover comes from the U.S. market, where the Swedish company has its own subsidiary, while most of the remainder is spread among the alpine countries, where the brand works only with independent dealers. Scandinavia makes up about 12 percent of the turnover. While Poc started with ski helmets, which still generate about 60 percent of the brand's sales, the company has moved into the cycling market and launched several complementary ranges, from ski goggles to body armor, eyewear, gloves, T-shirts and various accessories.
Due to the Swedish company's rapid expansion, financing is an issue. Poc has targeted average annual growth of 35 percent until at least 2015, with a longer-term target to reach a turnover of SEK 1 billion (€112.8m-$140.9m). The company is confident that it still has plenty of scope to expand in its existing categories, starting with wider distribution for its eyewear and the launch of products for road cycling.
Poc said that all employees would stay on board. It remains to be seen in what way any of the activities of Poc might be integrated with those of Black Diamond and its brand of backpacks, Gregory Mountain Products. Poc will stay in Stockholm, operating as a subsidiary of Black Diamond, and Ytterborn will report to the American company's CEO, Peter Metcalf.
Poc currently employs 18 people in Stockholm, seven at its Austrian subsidiary, the same for the U.S. market, and three at its store in Chamonix. It appears likely that activities in central Europe will be rejiggered to take advantage of Black Diamond's infrastructure in Switzerland, where the company has its European head office. Furthermore, Poc should lean on the European logistics of Black Diamond, instead of its outsourced warehouse and logistics in Borås. On the other hand, Poc's organization in Sweden may not directly support Black Diamond's development in Scandinavia since it focuses on product development and marketing, while its Swedish sales are handled by AG Trading, an independent distributor.
The three investors who sold their stakes in Poc are Bo Håkansson from Farstorp Invest, which held about 20 percent of the shares; Bjorn-Eric Borgen, a personality from the ski business in Vail, with another 22 percent; and Novestra Invest, an investment firm led by Theodor Dalensson, the most recent investor with a stake of about 10 percent.
