Amer Sports said it is currently exploring alternatives in respect of its cycling business Mavic, including a divestiture. It also warned that current estimates for FY09 are too “too optimistic” given current economic conditions while unveiling a €150 million ($215 million) rights issue to bolster its balance sheet.
Briefly addressing the Mavic cycling business, Amer said it is “considering strategic alternatives to focus its business portfolio more towards categories where it believes it has the best long-term opportunities and where the best group-wide synergies can be achieved. Consistent with this strategy, Amer Sports is currently exploring alternatives in respect of its cycling business Mavic. Among other alternatives, this strategic review may result in a divestiture of this asset.
Regarding the lowered guidance, Amer Sports, which also owns Salomon, Atomic, Precor, Wilson, Suunto and Arc'teryx, noted that releasing second quarter results on August 6, it had said it “it expected the market to remain challenging for the rest of the year and that it expected its full-year 2009 EBIT to be below last year's level. Based upon reports issued by a number of investment analysts, the current consensus estimate for the full-year 2009 EBIT is approximately EUR 60 million. Amer Sports believes that, based upon currently available information, this consensus estimate is too optimistic.”
Amer Sports added that it is not in a position to provide more specific guidance on its outlook for the year “due to the prevailing uncertainty in the macroeconomic environment and the significance of the last quarter of the year to the company's results.”
The Finnish company finally said it was launching the €150 million ($215 million) rights issue to bolster its balance sheet. The issue, led by J.P. Morgan and Pohjola, is fully underwritten.
Amer said proceeds from Rights Offering will be used to strengthen its financial position and to improve the company's operational and strategic flexibility. The Rights Offering is subject to shareholder approval at an Extraordinary General Meeting scheduled to be held on September 23. J.P. Morgan and Pohjola are acting as Joint Global Coordinators, Joint Lead Managers and Joint Bookrunners for the contemplated Rights Offering.
Key Highlights of the offering:
* The Rights Offering is fully underwritten through a combination of irrevocable commitments to subscribe from certain shareholders of Amer Sports and, subject to customary terms, conditions and agreements, underwriting commitments from J.P. Morgan and Pohjola.
* Shareholders in aggregate representing 46% of the outstanding shares of Amer Sports (Silchester International Investors Limited, Governance for Owners LLP, Orkla ASA, The Land and Water Technology Foundation, Ilmarinen Mutual Pension Insurance company, Varma Mutual Pension Insurance company, The State Pension Fund, Tapiola Mutual Pension Insurance company and Etera Mutual Pension Insurance company) have expressed their intention to vote in favor of the Rights Offering at the Extraordinary General Meeting of shareholders and their intention to subscribe for their pro rata entitlement of new shares offered for subscription in the Rights Offering.
* Subject to the approval of the Rights Offering by the Extraordinary General Meeting of shareholders on September 23, 2009, the terms of the Rights Offering, including the number of shares to be issued and the subscription price to be paid for the new shares, are expected to be determined by the Board of Directors of Amer Sports and announced on or about September 24, 2009.
* The subscription period for the Rights Offering is expected to be from October 5 up to and including October 19, 2009.
Roger Talermo, President and CEO, said regarding the offering, “”In our Q2 results announcement, we stated that our key priority in 2009 is on strengthening Amer Sports' balance sheet. Besides the operational measures we are working on, the Rights Offering plays a key role in this respect and it enables the company to execute on its
strategy.”
Amer further said in its release that “in the current macroeconomic environment, a clearly stronger balance sheet would be appropriate to effectively implement the company's strategy. As of December 31, 2008, Amer Sports' net gearing was 121%. The Rights Offering will strengthen the balance sheet so that the gearing would have been 71% on a pro forma basis as of December 31, 2008.”
Amer Sports noted that it has promptly reacted to the macroeconomic recession and the weak demand following the mild winter 2006/2007 by seeking further cost efficiencies in its organization and by focusing on reducing inventories and receivables. In addition, the company has completed two large restructuring projects over the past three years including the integration of Salomon into Amer Sports and the creation of a new business model in Winter Sports Equipment. Furthermore, Amer Sports is considering alternatives to focus its business portfolio more towards categories where it believes it has the best long-term opportunities and where the best group-wide synergies can be achieved.
Amer Sports said it believes that strengthening the company's balance sheet “is a pro-active step which will provide Amer Sports with more financial, strategic and operational flexibility:
* Strengthening the balance sheet by paying down existing debt is expected to position Amer Sports to receive more attractive terms when its existing debt maturities draw closer and need to be refinanced, thereby providing Amer Sports with more financial flexibility.
* Amer Sports' management believes that a stronger balance sheet improves the company's operational flexibility by enabling the company to continue implementing its growth strategy by further leveraging its key brands through new line-extensions and continued product innovations as well as through geographical expansion into new markets. It would also support the company's strategy in getting closer to the consumer by opening additional brand stores and through online channels.
* Amer Sports' management believes that a stronger balance sheet enables the company to further improve its operational efficiency and profitability by further developing its logistics and integrated IT system, which are expected to result in more transparent and efficient business processes.
* Amer Sports' management is considering different alternatives to focus the business portfolio in order to have sufficient resources for its core businesses. A stronger balance sheet will increase the company's strategic flexibility.”
In conclusion, Amer said it is “committed to continue to strengthen the balance sheet by reinforcing capital allocation discipline, by continued emphasis on free cash flow and by completing its review of the role of Amer Sports' business areas.”
