Cherokee Global Brands, the owner of numerous active lifestyle brands, including Cherokee, Tony Hawk, Sideout and Everyday California, said it intends to enter into a share purchase agreement valued at $95.8 million to acquire outdoor footwear brand Hi-Tec Sports International Holdings B.V.
The Hi-Tec business will be converted to a branded licensing model, consistent with the new owner’s strategy. That means Cherokee will sell substantially all assets related to Hi-Tec’s wholesale operations to new operating partners, the proceeds from which (estimated at $62 million) will fund a portion of the Hi-Tec acquisition purchase price, officials said. The new operating partner licensees will enter into license agreements with Hi-Tec Sports (to be a wholly owned subsidiary of Cherokee Inc.) and pay Cherokee royalties for the future use of Hi-Tec intellectual property. Hi-Tec’s headquarters will remain in Amsterdam.
Cherokee has secured license agreements for core footwear categories that will strengthen and expand the brand’s presence in the United Kingdom, Continental Europe, The United States, Canada and South Africa, officials said. It will also maintain distribution agreements throughout the world including South and Central America and Asia.
Hi-Tec Sports Chairman Frank van Wezel, who founded the company in 1974, will remain involved with the brand, purchasing the Hi-Tec license for the South Africa market. His son, Ed Van Wezel, will remain CEO of the brand under Cherokee.
Officials expect the deal to add approximately $19 million of licensing revenue and $7 million in Adjusted EBITDA during first full fiscal year post-closing. In 2015, Hi-Tec recorded revenue of approximately $143 million on worldwide wholesale sales sold under the Hi-Tec and Magnum brands. In addition to the funds from selling off the wholesale operations, Cherokee will fund the purchase through cash on hand and a new credit facility from Cerberus Business Finance, LLC.
“The acquisition of the Hi-Tec and Magnum brands aligns with our strategic focus of diversifying and building upon our active lifestyle portfolio as we continue to grow our global footprint,” stated Henry Stupp, chief executive officer of Cherokee Global Brands. “Hi-Tec’s high-equity brands will build upon our presence in the active, outdoor markets, and we are excited by the potential to further expand these brands into additional categories including apparel, accessories, wearables, outdoor products and more.”
Photo courtesy Hi-Tec
