Youngone Corp., the big Korean-based manufacturer of outdoor apparel, shoes and backpacks, made one more step into the branded business a few days ago by raising its stake in the Swiss-based Scott Sports Group to 50.01 percent. The move boosted its share price. Last year, it had silently acquired a majority stake in Outdoor Research, the American outdoor brand.
Youngone, whose other holdings include a French sports apparel firm, Poivre Blanc, had already acquired a 20.1 percent interest in Scott in 2013 at an undisclosed price. In the more recent transaction, Youngone paid about US$100 million for the additional shares. It bought the shares from Beat Zaugg, Scott's chairman and chief executive, and other members of the management. The acquisition will allow Youngone to consolidate Scott into its financial accounts.
Zaugg, 57, will remain as chairman CEO, with a stake of around 47 percent. He has been with Scott for 29 years, and he has run the company for 16 years. In 1998, he and other executives took over Scott from the company's previous American owners in a management buyout. Some of them cashed out of the company in two steps in 2002 and 2005.
Scott describes itself as a global sports company with American roots, European engineering, Asian production and Swiss management. With a year-round offer of products in the ski, outdoor, running and cycling categories, Scott has been growing at an annual rate of between 5 and 10 percent annually, reaching a level of 460 million Swiss francs (€439.2m-$496.3m) in the past year, with more than two-thirds coming from bikes.
The company is said to be profitable, but no details could be obtained on this point. Youngone's investment is expected to improve Scott's financial leverage with its lenders to help finance its further growth.
Scott bought the U.S. subsidiary of Garmont in 2012 and its ski boot business last year. Its sales of ski boots reached 30,000 pairs last year.
Youngone has been a production partner of Scott for many years. In 2011, prior to its initial investment in Scott, it formed a joint venture with the Swiss firm for the distribution of its products in Korea, Japan and Greater China.
As in the case of Scott, Youngone's investment in Outdoor Research has been gradual. The Korean company's interest in OR was apparently due to its strong recognition as a technical outdoor brand with its own factory in Seattle. Since the deal last year, Youngone has been supporting Outdoor Research on the supply side, but not necessarily by shifting production to its own factories. The Korean owner is expected to help upgrade the IT systems at Outdoor Research, which have been described as creaking.
Furthermore, the two companies have been discussing a potential distribution deal in South Korea. Outdoor Research is already active in other Asian countries with partners in China and Japan but its latest investments have been more strongly focused on expanding distribution in Western Europe, under the supervision of its three-strong European office in Switzerland.
While Outdoor Research has built up wide distribution in Germany through its accessories, it has been enjoying faster growth in recent seasons in France and Sweden. Among the latest changes, Outdoor Research is splitting from the Mountain Boot Company and switching to an agency in the U.K., Pro Agencies, which was formed less than two years ago to sell brands owned by Cascade Designs. The brand's next European project is Italy, where Outdoor Research has started searching for an agency – in line with its strategy to work with agents in the European Union.
As a group, Youngone has annual revenues of around $1.3 billion. It employs a total of around 72,000 people at factories in China, Bangladesh, Vietnam and Latin America.
