A bankruptcy judge in North Carolina agreed earlier this month to sell certain assets of Advanced Sport Enterprises (ASE), a U.S.-based distributor and retailer of bicycles, to HTM, the holding company of Head Sport, at an auction for $21.5 million. After a court hearing last week, the judge pushed back the approval of the sale to Feb. 1, asking all the parties to negotiate a proper and satisfactory purchase agreement.
The assets being purchased are various brands of bicycles – Fuji, SE Bikes, Kestrel and Breezer – that are produced by Ideal Bike, a Taiwanese company that has a 17 percent stake in ASE. It formerly held the rights to distribute these brands under license outside the U.S., netting annual revenues of about $50 million, but lost the rights in the North Carolina bankruptcy court that managed the auction. Ideal, which put in a rival bid in concert with other investors, appealed the court's verdict.
It emerged at the hearing that Ideal had sold some of the licensed bicycles in Europe in violation of the court order. HTM claimed that this had considerably reduced the value of the trademarks in the region. It also argued that the agreed purchase price of $21.5 million included about $9 million in cash, raising some eyebrows.
Wells Fargo, the largest unsecured creditor of ASE with claims of more than $20 million, said it would not support HTM's bid if it included the cash. The list of the unsecured creditors also includes Accell Group, Vista Outdoor, Garmin, Louis Garneau, Pearl Izumi and many Chinese suppliers.
Prior to the auction, ASE had sold another one of its bicycle brands, Roubaix, to Specialized Bicycle Components. Aside from its profitable distribution business, ASE also owned a loss-making chain of 102 bike stores in the U.S., called Performance Bicycle, which was shut down by the court for liquidation prior to the auction. ASE had bought the chain two years ago, turning a heavy debt into shares. It filed for bankruptcy protection in December.
If the purchase of ASE's bike brands goes through, Head would expand into yet another new segment, besides snow sports products, tennis and scuba diving. The move has precedents. Another major player in the snow sports market, Rossignol, has in recent years turned to cycling as a counter-seasonal segment, notably with the acquisition of Time Sport and Felt. Amer owns not only Atomic and Salomon but also the French bicycle-parts manufacturer Mavic, although it is now seeking to divest the cycling brand.
