Skins, the Swiss-based specialist in compression sports apparel, has inked a strategic deal with Itochu, including the sale of its trademark rights to the Japanese group for distribution in Japan, China, South Korea, Taiwan and Hong Kong. Skins said it had an option to buy back the rights after ten years.
The deal enabled Jaimie Fuller, the founder and majority shareholder of Skins, to buy back a 36 percent stake held in Skins by Equity Partners, an Australian private equity firm, since 2007. The purchase cost A$ 30 million (€23.6m-$31.1m), which values the entire company at about A$ 83 million (€65.2m-86.1m). After this acquisition, which gives Fuller almost full control of Skins, the company still has some money left over from the deal with Itochu to invest in its international development.
The deal with Itochu splits Skins' product range into two categories. Skins itself will continue to control the development and sourcing of compression garments, which it pioneered in the sports market. On the other hand, Itochu may develop its own non-compression products with the Skins trademark. The distribution of Skins in the countries attributed to Itochu will effectively be run by Descente, the sports apparel company in which Itochu holds a stake of 25 percent – making it the largest shareholder.
Fuller insisted that the deal with Itochu was based on a close partnership, to make sure that the Skins products and brand are marketed by Itochu along the same lines as in other countries. For the same purpose, Katsuji Morishita, a Descente manager, will be stationed in Switzerland. The deal with Skins will be supervised in Japan by Yoshihiro Fukushima, general manager of brand marketing in Itochu's textile division.
Skins was already sold in China as part of a co-branding agreement with Li Ning, started in 2010. This set-up will remain operational for the time being, with Skins paying royalties on Chinese sales to Itochu, but the Japanese firm will take over when all parties are ready for the switch.
The changes in distribution will start in July with South Korea, where Skins was previously distributed by Viva Sport. When it comes to Japan, the switch will occur in December. Skins has been distributed in the country since 2007 by CPI, which turned Japan into the second-largest market for Skins after Australia, with sales to about 2,400 Japanese stores. Although the contract with CPI was coming to an end anyway, Fuller was eager to reward the company with a small stake in Skins.
The distribution of Skins in Hong Kong and Taiwan will be taken over by Itochu in March next year. The two territories were previously part of a wider agreement with Transview in Singapore. It covers eight countries in the region, including Indonesia and Malaysia.
Equity Partners said that the time had come to search for a strategic partner, after Skins had lifted its sales to the equivalent of about $50 million in 2011, compared with $16 million at the time of Equity Partners' entry into the capital in 2007. Among many other investments, Skins has moved its head office from Sydney to Zug, in Switzerland, and opened subsidiaries in France and North America. Itochu stated that its five-year sales target for the countries in which it holds rights for Skins amounted to 10 billion yen (€90m - $120m).
