China’s Anta Sports (02020.HK) is offering to buy Finnish sports equipment maker Amer Sports Corp. for 4.6 billion euros (US$5.39 billion).
Most Chinese media described Amer as the maker of Wilson tennis rackets, a famous brand endorsed by tennis star Roger Federer.
In fact, Amer Sports owns more than a dozen brands and Wilson is only one of them. Some of the other brands include Salomon, Arc’teryx, Peak Performance, Atomic, Mavic, Suunto and Precor. Most of them are leaders in their specific market segments.
The company’s business is divided into three broad segments, ball sports, fitness and outdoors. In addition to popular sports like tennis and baseball, Amer’s product portfolio also covers quite a number of niche markets, such as diving.
Amer Sports is listed on the Helsinki Stock Exchange with a market capitalization of 3.3 billion euros. Anta Sports proposed a full takeover at 40 euros per share, or a price premium of 38 percent. That represents a price-earnings multiple of 50 times.
So why would Anta Sports want to pay such a high price for Amer Sports?
Last year, Amer Sports posted a sales revenue of 2.7 billion euros and a net profit of 220 million euros, with a gross margin of 45 percent. Indeed, the company is doing well across a wide range of markets.
Some of Amer Sports’ products have rather high unit prices. A set of skiing equipment or a bike wheelset, for example, could cost more than HK$10,000.
Europe, Middle East and Africa contributed 43 percent of its revenue last year while the Americas accounted for 42 percent. The Asia-Pacific market generated only 15 percent.
China, meanwhile, accounted for 4.5 percent of total revenue. Perhaps Anta’s idea is to vastly expand the presence of Amer Sports brands in the China market.
There could be another reason. Amer Sports is positioned as a producer of premium brands. Acquiring it could help Anta enhance its image in the market, something like what the Volvo deal did for Geely.
Chinese sportswear brands have found it hard to compete with leading foreign brands like Nike and Adidas in the high-end market. Leveraging on Amer Sports’ brands and technology to mount a serious challenge to these rivals could be part of the objective of the deal.
However, are there enough customers who can afford Amer Sports’ expensive gear? That is what Anta has to find out.
This article appeared in the Hong Kong Economic Journal on Sept 14
Translation by Julie Zhu
[Chinese version 中文版]
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