Working through Fila Luxembourg, its subsidiary for the international market, Fila Korea has agreed to take over control of Integrix Sports Group, the London-based company that holds the master license for the Fila brand in Europe, the Middle East and Africa. Integrix' former controlling shareholder, Ares Capital, retains a 25 percent stake in the business, which includes European master licenses for brands such as Ocean Pacific and Starter.
The terms of the transaction could not be determined, but sources indicate that Fila Luxembourg has agreed to take over the high debt of Integrix, whose sales declined by less than 7 percent last year, while remaining above €100 million, in contrast with previous reports. Ares Capital, an investment fund based in Los Angeles that acquired control of Integrix toward the end of 2009 from the Indian Batra Group, Barclays Bank and and other investors, will provide new financing for the business.
The new shareholders have not yet decided whether they should keep Fila's European operations or license them out. They have taken on board an experienced executive, George Napier, to make a strategic evaluation and recommend a solution to their long-standing problems of market positioning and profitability. The former chief executive of Integrix, John Suirdale, has left the company along with other members of its top management.
Napier retired a few months ago as president and chief executive of Prince Sports, where he led its management buyout from Benetton SportSystem in 2003 and then resold it in 2007 for a return of three times on the original investment. The Canadian executive previously ran other companies and led a major turnaround at Wilson Sporting Goods, where he worked in various positions including the management of its European operations, based in the U.K.
Fila Korea has been able to acquire control of Fila in Europe after major sales increases in the U.S. and other countries and a successful public offering on the Seoul stock exchange last September, which have allowed the Korean company to pay back the debt from its acquisition of the Fila brand and its U.S. operations from Cerberus in 2007. At that time, Fila Korea decided to license out its European operations to Batra in return for very low royalties because it would have been unable to finance a full takeover.
Due to be published shortly, the results of Fila Korea for 2010 are expected to show a jump of 26 percent in the global revenues of the Fila brand, including those of its master licensee in Latin America, the Dass Group. In the U.S., Fila became profitable last year on a 55 percent sales increase and its orders for 2011 are up by about 50 percent.
In view of these performances, company officials feel confident that Fila's European operations can be turned around, too. According to them, they have suffered in the past from a lack of adequate resources and inconsistent brand strategies, among other reasons.
Fila's business in India, which is doing well, continues to be conducted in a licensing mode. Rajiv Batra, the former chief executive of Integrix, wanted to turn the Indian operation into a subsidiary, but the project was not implemented (more on this in the Indian market research report that we are compiling).
