The industry's other big deal of the week was Spyder Active Sports, Inc.'s acquisition of Cloudveil Mountain Works, Inc. Although it is essentially a transaction between two private equity firms, Cloudveil VP, co-founder and product designer Steve Sullivan said “with Spyder it kind of feels like coming home. We've found a lot of cultural synergies.”
Among them is a love for skiing. Sullivan and Co-Founder Brian Cousins are devoted backcountry skiers from Jackson Hole. Spyder CEO Jake Jacobs has been credited with inspiring his father David Jacobs to create Spyder while ski racing as a teenager. Like prAna, Cloudveil has been put through the due diligence ringer in the year since its owner Cerberus Capital Management, L.P. put it up for sale as part of a reshuffling of the portfolio at Sport Brands International.
SBI acquired Cloudveil in 2005 at a time when its sales were growing nearly 80% a year. Spyder, meanwhile was acquired in 2004 by Apax Partners, which advises private equity funds controlling $35 billion. The deal gives Spyder a foothold in the outdoor specialty channel, which is three to four times larger than the specialty ski channel where it now resides, Jake Jacobs said in an interview with The B.O.S.S. Report.
It will also invigorate Spyder's efforts to establish a spring/summer business. Cloudveil is best known for inventing the softshell and for its growing spring/summer line, including a new fly fishing line, whicj now comprises about 30% of sales, said President Brian Cousins. The company will immediately contribute to Spyder's earnings, Jacobs said.
While Jacobs declined to release current sales figures for either company, in 2004 he told The B.O.S.S. Report that Spyder had $85 million in bookings and would become a $300 million company by 2009. Sources familiar with the Cloudveil sale said the company's sales were $18 million in 2007. Cloudveil was attracted to SBI for some of the same reasons prAna liked Liz extensive European distribution and global sourcing capabilities.
But unlike prAna, Cloudveil lost much of its infrastructure when SBI sold Fila in January, 2007 to Korean investors. That sale left Cloudveil having to either recapitalize the business or merge with a strategic partner. Spyder, which has been sourcing in Asia for 30 years and is among the world's best know and largest ski brands, was a natural. The company has long term relationships with the best technical fabric factories in the region as well as people on the ground to manage those relationships, said Jacobs.
“We are in the factory once a week during peak production time,” said Jacobs, who set up Spyder's Asian sourcing system and spent 1991 through 1995 as a product development manager for Nike in China. By comparison, Cloudveil visited its Asian factories four to six times a year, said Sullivan.
Spyder also has an extensive distribution system in the European market, where Cousins said Cloudveil is effectively “nonexistent.”
“We kind of pulled back from the market because we had to have all hands on deck for the domestic business,” Cousins said of the news a year ago that Fila was being sold. “Europe is not a market you want to do wrong. You've got to get it right the first time.”
Cousins said sales growth at Cloudveil has maintained over the last three or four years at 40%, down significantly from the nearly 80% it was reporting as recently as 2004.
“The distraction of the deal process forced Steve and I to shift focus elsewhere,” said Cousins. “I dont think there is any doubt that, had we been focused more on building the Cloudveil brand, that we could have continued to crank growth up greater than that.”
Cloudveil was able to launch its fly fishing line under SBI, picking up 150 dealers initially. It now has about 500 specialty dealers, compared to 260 in 2004. Cousins said the company has focused more on deeper penetration of existing accounts than increasing its door count.
Jacobs, who was named CEO of Spyder in June, said Cloudveil will contribute to Spyder's earnings this year albeit from a distance.
Cloudveil will remain a separate brand entity and operate as a wholly-owned, independent division of Spyder. Cloudveil will retain a separate sales force and Cousins and Sullivan have signed multi-year contracts to continue in their roles.
“What this really allows us to do is let Spyder be authentic to its heritage,” said Jacobs. “We place a high value on authenticity and the research we did showed it's one of the very best brands out there in the outdoor arena.”
Although the marriage comes amid economic headwinds, it also coincides with major snowfall that is driving winter sports sales. Sales growth at both Cloudveil and Spyder has been strong this winter, the executives said. Jacobs said Spyder is exceeding plan for its fiscal year, which ends in March, with help from Europe, which generates nearly 50% of its business.