By Eric Smith
Author’s note: For more insight on the Canadian Tire-Helly Hansen deal, click here to read our Q&A with Helly Hansen CEO Paul Stoneham.
Canadian Tire Corp.’s acquisition of iconic outdoor brand Helly Hansen from Ontario Teachers’ Pension Plan for US$771 million fulfills two goals for the diversified company—bolster the company’s core business and extend the company’s reach across the globe.
“Internationally, Helly Hansen has created a substantial operation and has successfully and profitably entered many markets,” Stephen Wetmore, president and CEO, Canadian Tire, said on Thursday’s earnings call with analysts. “This, too, will serve as a foundation for us to build upon in future years for the existing or new owned brands.”
Founded in 1877, Helly Hansen’s core categories include sailing, skiing, mountain, urban, rainwear and workwear. With wholesale and retail distribution capabilities, the brand sells to more than 40 countries. Adding a company with that much reach and brand recognition helps Canadian Tire deepen the company’s presence in existing markets and expand to new ones.
Through the Mark’s and FGL retail stores, Canadian Tire has a “long history with Helly Hansen as one of its largest customers,” the company said in Thursday’s press release.
“For more than ten years, Helly Hansen has been an exceptional fit with CTC and this acquisition will strengthen our assortment across all of our banners,” Wetmore said. “With our capabilities and Helly Hansen’s trusted global brand and management team, we see tremendous opportunity for CTC and Helly Hansen, in Canada and internationally.”
During Canadian Tire’s conference call to discuss the deal as well as first-quarter earnings, the company laid out how the acquisition supports the core business:
Capabilities transferable to CTC:
- Adds leading outdoor and workwear brand
- International market access/operations
- Wholesale and account management
- Soft goods product design and sourcing
- International brand management
- Profitable, international expansion expertise
Capabilities transferable to Helly Hansen
- Financial strength for continued investment
- Network of 1,700 stores and 300+ categories
- Hard goods product design and sourcing
- Digital and retail analytics capabilities
- Ability to manage multiple brands
Canadian Tire also outlined how the acquisition can add growth opportunities:
- Helly Hansen has a complementary international footprint that can accelerate CTC’s owned brand expansion
- Helly Hansen’s products are distributed to regions with similar climates and consumer demand profiles to Canada
- CTC’s range of relevant brands and products can be sold through these international channels
For access to the full presentation on Canadian Tire’s website, click here.
Helly Hansen CEO Paul Stoneham, who spoke with SGB on Thursday, soon after the announcement was made, said boosting the Helly brand around the world would be a priority for Canadian Tire, benefiting both companies in the process.
“We bring new capabilities to [Canadian Tire],” Stoneham told SGB. “From that perspective, we’ve had a very successful run the last four years, outstripping the market growth rate. What they’re doing is backing us to continue that trajectory, if not accelerate it, especially in Canada. You look at the price paid—24.3 x EBITDA or two times revenue—you don’t do that unless you plan to back that and think you can get a lot of growth out of it.”
Hansen will continue to run the Helly Hansen brand from the company’s Oslo, Norway, headquarters, and his leadership team will remain intact, reporting to CTC Executive Vice President Mahes Wickramasinghe.
Other than that, not much will change for Helly Hansen, which is hoping to ride the recent sales momentum. The company reported that 2017 revenue increased 18 percent to NOK 2.9 billion (US$359.8 million) in 2017 while operational EBITDA rose 25 percent to a record NOK 255 million (US$31.6 million).
“We’ve been really focused on the brand and the people and making sure we’re consistent on our strategy—the combination of focus and financial discipline, but really investing in the brand design and development,” Stoneham told SGB. “We are on a five- to 10-year journey to transform this business. It’s gone well so far and I think we have the ability to go further.”
Photo courtesy Helly Hansen
Author’s note: “Behind The Deal” is an occasional series that takes a deep dive on M&A transactions in the active lifestyle space. Email me at firstname.lastname@example.org to have your deal featured.