Columbia Sportswear Company announced that it has entered into an agreement to form a joint venture with Swire Resources Ltd. designed to expand the market-leading position of the company's Columbia brand and to further establish and grow the Mountain Hardwear brand in China.
Swire Resources Ltd., a subsidiary of Swire Pacific Limited, has operated as Columbia Sportswear's exclusive independent distributor of Columbia and Mountain Hardwear branded products in China since 2004, and in Hong Kong and Macau since 2002. In China, Swire sells to a network of wholesale dealers that, as of June 30, 2012, operated approximately 530 Columbia Sportswear retail locations and 45 Mountain Hardwear retail locations in 135 cities. In addition, Swire directly operates more than 70 Columbia branded retail locations in 7 cities.
Swire Resources' 2011 Columbia sales in China totaled approximately $123 million, generating low double-digit EBITDA. Sales are on pace to achieve double digit growth in 2012 and future plans include continued expansion of dealer-operated and owned retail locations in additional cities.
The new joint venture is expected to begin operations Jan. 1, 2014 with headquarters in Shanghai. Columbia will own 60 percent of the joint venture; Swire will own 40 percent, with profits and losses shared in similar proportions. The joint venture carries an initial term of 20 years and includes a provision for the purchase or sale of the minority interest any time after the fifth year.
“We are very excited about extending our relationship with Swire Resources to pursue the significant long-term growth opportunities in China,” said Tim Boyle, Columbia's president and chief executive officer. “During the past eight years as our exclusive independent distributor, Swire has established Columbia Sportswear as an authentic outdoor brand in China, achieving a leading market position based on strong emotional connections with consumers and superb operational capabilities. Swire's expertise and deep understanding of Chinese consumers are vital to driving continued growth of our brands in this important market.”
JB Rae-Smith, executive director, Trading and Industrial Division of Swire Pacific Ltd, added, “China's rapidly growing outdoor market is benefiting from an expanding economy, increasing consumer discretionary incomes, and greater interest in outdoor leisure activities. This new joint venture with Columbia Sportswear provides critical resources to capitalize on these long-term trends.”
Swire Resources will continue to serve as the exclusive independent distributor of Columbia Sportswear in Hong Kong and Macau.
The joint venture transaction is subject to various conditions, including regulatory approval in China, and is expected to be completed on or about the January 1, 2014 commencement date.
