Treading into interesting and promising new territory, Wolverine Worldwide unveiled its acquisition of Sweaty Betty, a fast-growing U.K.-based brand of women’s fitness and lifestyle apparel that was going to develop a collaboration with Merrell in the area of footwear.
The all-cash transaction was closed on Aug. 2, giving the business an enterprise value of about $410 million, or about 16 times the company’s Ebitda. Wolverine, which is funding the transaction with its own cash and credit lines, said it will be accretive to its own earnings in the first 12 months. It is expected to boost Wolverine’s growth prospects.
Positioned in the premium segment of the activewear market, Sweaty Betty has been rising at a strong double-digit rate in the last four years. It is expected to generate sales of around $250 million this year, 35 percent above the 2019 level. It has been rising at a rate four times higher than the growth of a global activewear market estimated at about $200 billion. As already reported, Sweaty Betty’s sales grew by around 60 percent in 2020, thanks largely to the Covid-related lockdowns. It has been moving into new categories such as swimwear and clothing for cycling and skiing, while developing the lifetyle segment.
Sweaty Betty’s head office in London is located close to the European office of Wolverine, which sees opportunities for the brand’s further growth through its planned diversification into footwear at some point and the support of its own back office and distribution network, as most of its sales still come from Europe. The group can help Sweaty Betty to open stores in the U.S. and to make deals with its foreign distributors, many of whom operate their own stores. Furthermore, Merrell, Saucony, Keds and other brands owned by Wolverine may benefit from Sweaty Betty’s expertise in apparel design, development and sourcing. Collaborative collections with some of these brands are already planned for next year.
“The acquisition of Sweaty Betty complements our strategic shift over the last several years from a traditional footwear wholesaler into a consumer-obsessed, digital-focused growth company,” commented Blake W. Krueger, Wolverine’s chairman and CEO, adding that it will also give the group a leadership position in the growing women’s activewear category. It is in tune with the digitalization and casualization of the apparel market as well as the strong current health and fitness trend.
Wolverine’s announcement of the takeover came only a few days after the release of its excellent results for its second quarter, which showed more than doubled revenues from the group’s own e-commerce and an improved sales forecast. The takeover of Sweaty Betty should raise the group’s total turnover for this year by around $100 million to between $2.44 billion and $2.50 billion.
Founded in 1998 by Tamara and Simon Hill-Norton, Sweaty Betty has been in the forefront of the women’s fitness movement and a pioneer in the development of e-commerce, complementing a network of 65 mono-brand stores in the U.K., Hong Kong and Singapore, plus shop-in-shops at Nordstrom and other key retailers. Engaging with consumers through the social media, its direct-to-consumer (DTC) business has come to represent over 80 percent of its sales, with about 70 percent of that generated via e-commerce. The gross margin is higher than that of Wolverine, thanks in part to its high prices, but in recent years, the brand has reportedly been less profitable in terms of Ebitda because it has been in an investment mode.
Wolverine, which has a long track record of acquiring and integrating footwear brands, has been pushing the digital sales channel lately. Its acquisition of Sweaty Betty can be seen as an alternative to the takeover of Reebok, a bigger and more diversified player in the women’s fitness market for which it reportedly expressed interest in combination with the Authentic Brands Group.
Brendan Hoffman, who recently replaced Krueger in the role of Wolverine’s president and will soon succeed him as CEO, said that “Sweaty Betty aligns perfectly with our strategic growth plan for Wolverine Worldwide as we focus on growing digital channels, expanding our international footprint and building our brand portfolio beyond footwear.” Julia Straus will continue to serve as Sweaty Betty’s CEO, reporting to Hoffman.
Technically, Wolverine has acquired all the shares of Lady of Leisure InvestCo, the company that owns the Sweaty Betty brand, from L Catterton and other shareholders including Wittington Investments, which had invested in the brand in 2014. L Catterton is the joint venture formed in 2016 between LVMH and Catterton, a U.S.-based equity investment company that had made an unspecified investment in Sweaty Betty the year before. Wittington is the investment vehicle of the British Weston family.
Rothschild & Co. served as financial advisor to Wolverine, with Baker McKenzie and Honigman LLP acting as legal advisors. Goldman Sachs International served as lead financial advisor to Sweaty Betty, and Financo/Raymond James as its financial advisor. Gibson Dunn & Crutcher LLP served as lead legal advisors to L Catterton, Wittington Investments and Sweaty Betty. Pinsent Masons LLP served as legal advisors to Sweaty Betty.
