Adding to an impressive stable of brands that already includes Element, Nixon, and Sector 9, Billabong International Ltd. reached an agreement last week to acquire DaKine Hawaii Inc., best known for its high-tech backpacks.
The final purchase price could total as much as $133 million, with Billabong initially paying $99.9 million in cash. The final amount may also include up to $33.3 million in bonus payments paid in 2012, subject to the future performance of the business and certain management retention conditions.
The purchase is subject to several conditions, including U.S. regulatory approvals. It is expected to be completed by Oct. 1, 2008.
The DaKine purchase will add accessories such as surfboard bags and snowboarding gloves to Billabong’s product range while increasing sales by about 4% for the consolidated company. DaKine is expected to be EPS positive in year one.
Other brands owned by Billabong include Von Zipper, Honolua Surf Company, Kustom, Palmers Surf, Xcel and Tigerlily.
“DaKine is well established within the boardsports sector and it is a brand that has built its reputation on the quality and reliability of its technical range,” said Billabong International Limited CEO Derek ONeill. “It has built a strong sales base in North America and a growing sales base in several international territories, making it a powerful addition to the Group.”
Rob Kaplan, who founded DaKine in Hawaii in 1979, will remain integrally involved as a key member of the DaKine management team and will continue to be based in the brand’s regional office in Maui, HI. All employees, along with the current management team, including DaKine’s CEO Bill Bottomly, are being retained and will remain in the brand’s head office in Hood River, OR.
Since going public in 2000 in Australia, Billabong has been rapidly adding to its stable of action-sports brands, acquiring Von Zipper and Element Skateboards in 2001; Honolua Surf Company, Kustom footwear and Palmers Surf in 2004; Nixon in 2006; and Xcel and Tigerlily in 2007. This year, Billabong acquired Quiet Flight, an East Coast retailer and operator of 13 stores, including the flagship Billabong and Element retail stores in New York City; as well as Sector 9, the skate longboard manufacturer.
Billabong North America General Manager Paul Naud said Billabong was particularly attracted to Dakine’s strength in the ocean boardsports sector as well as its 20-year history in snow.
“DaKine is a brand that leads the boardsports backpack category, excels in the surf accessories market in the ultimate testing ground of Hawaii and has excellent penetration in winter product categories, including snow gloves,” said Naude. “It is a brand that is focused on function over fashion and this, together with a strong team of athletes and compelling marketing campaigns, has endeared it to active boardsports participants.”
Meanwhile, Australia-based Billabong reported revenue for its fiscal year ended June 30 rose 17.6% in constant currency terms, or 10.2% in reported terms, to A$1.35 billion ($1.19 bn). Net profit after tax (NPAT) rose 5.5% to A$176.4 million ($155.2 mm). Excluding the impact of FX rates, earnings were up 12.6%. Underlying NPAT in constant currency terms, excluding non-recurring tax credits in the year ago period, was up 18.5% for the year.
By segment, revenues in the Americas were up 16.1% in constant currency terms to A$620.5 million ($557.1 mm). Strong double-digit revenue growth in constant currency was achieved in all regions in the Americas. EBITDA in the Americas climbed 16% in constant currency terms to A$112 million ($100.8 mm). EBITDA margins were slightly lower at 18.1% compared to 18.5% due to growing contributions from the lower-margin South American business. Unadjusted for currency rate changes, Americas revenues grew 2.6% and EBITDA was 0.1% higher. In constant currency terms, full year sales revenue in Europe was up 20.3% to A$314.4 million ($250 mm); and Australasia was up 18.1% to A$412.7 million ($330 mm). At constant currency rates, EBITDA rose 36.7% to A$68 million ($54 mm) in Europe, and climbed 17.5% to A$110 million ($88 mm) in Australasia.
Assuming existing exchange rates, Billabong said it expects EPS growth in the range of 8% to 12% in the current year.”
“While there is understandable caution among retailers the world over, we remain confident that our multi-brand, multi-region business model will deliver healthy growth and our forward orders support this view,” said ONeill.
