Pearl Izumi has a new buyer, and it seems to be a better fit this time around. Shimano Inc., the Japanese cycling and fishing gear maker, reached an agreement to buy Pearl Izumi for $69.5 million. Nautilus had put the cycling and running brand on the selling block last October.
For Nautilus, the sale is part of an extensive turnaround plan that includes debt restructurings, layoffs and other cost containment moves. The fitness equipment supplier has already absorbed a $19.4 million charge related to the terminated acquisition of a plant in China, and will also record a loss on its investment in Pearl Izumi. In July 2005, Nautilus acquired Pearl Izumi for approximately $68-million in cash and about $6 million in assumed debt.
But Pearl Izumi's Eckmann in an interview with B.O.S.S. was enthusiastic about his company's new partner.
“Shimano provides us with great stability and a long term strategic approach to our business” said Eckmann. “They have a truly global perspective which is also very welcome, and they are tapped into what is happening with consumer trends, specifically as it relates to global cycling. Together we have the ability to offer the cyclist a more complete solution as it relates to their riding experience.”
David Pfeiffer, president of Shimano American Corporation, based in Irvine, CA, told B.O.S.S. that the acquisition brings together two companies started by Japanese families sharing a passion for cycling.
“We weren't really looking for an acquisition,” said Pfeiffer. “But we were open to an acquisition of a strategic type and this one kind of came along at an opportune time and we jumped on it. The deeper we looked at it, the more we liked what we found.”
In particular, Pearl Izumi adds a cycling apparel offering for Shimano in the U.S. market. The company sells a Shimano cycling apparel line overseas but not in the U.S.
“Certainly the cycling apparel component was far and away the most attractive element of the deal,” said Pfeiffer. “That's not a segment we're in in the U.S. and we're not in strongly on a worldwide basis from a product standpoint. It gives us a whole different view on the apparel side. They have a tremendous amount of expertise in the design and production of performance apparel and also their ability to get that to the market, especially to the independent bike channel, is extremely strong.”
But the acquisition also bolsters Shimano's strong footwear lineup in the U.S. Pearl Izumi is positioned slightly differently here than Shimano's footwear line.
“Shimano is very strong on technology side in footwear and Pearl Izumi is a little more known for fashion and design,” said Pfeiffer. “Not to minimize their quality and performance at all. It's just a little more aggressively positioned in the design and fashion element.”
From Shimano, Pearl Izumi gains some production technology expertise and a few other disciplines, particularly worldwide distribution capabilities. That should help Pearl Izumi expand internationally.
“We have a much stronger infrastructure so we can certainly help them down the road,” said Pfeiffer.
From an organizational standpoint, Pfeiffer stressed that Pearl Izumi would be maintained as a stand-alone company with its own management team. Shimano already operates G. Loomis, its other fishing brand, as a stand-alone business.
Pfeiffer also noted that Shimano is a well-funded company that can support Pearl Izumi's growth, and Pearl Izumi employees and retailers should take comfort knowing that a Shimano plans to grow the brand smartly over the long term.
“The brand wasn't bought by a PE (private equity) firm looking to build it up and sell it into a couple years,” said Pfeiffer. “We want to keep and grow the brand.”
Eckmann also agreed that the sale certainly brings much-needed stability to the brand. At the same time, he told B.O.S.S. that the lengthy sales process was an overall healthy experience for the company.
“The selling process itself really allowed us to align ourselves as a team internally and rally around our brand, our passion for running and cycling, our products, and our business strategies,” said Eckmann. “We met with a number of people that asked many tough questions, and the process of answering their questions helped us see things in a new light. The process also served to reinforce just how strong of a brand and business we have.”
“This was actually a great opportunity for us to find the best possible partner,” adds Eckmann. “Never once did the team from Shimano make us feel like we were being 'bought.' Instead, we felt as if we were joining their team as equals. This may sound crazy given the difference in size of the companies, but it is really true.”
Similar to Pfeiffer, Eckmann said both companies share similar passions but should learn from each other.
“Shimano is an extraordinary company, and has unparalleled expertise in mechanical hard-goods. Overall, we will look to learn from them in every area from sourcing and manufacturing, to quality assurance, to consumer insight,” said Eckmann. “We are also very impressed with their ability to be a leader in both the cycling and fishing markets, and we believe we can learn a great deal that we may apply to our emerging run footwear and apparel business.”
For its part, Pearl Izumi's strong position in performance apparel, fabric technologies and run footwear are areas that Shimano did not previously possess.
“We can share a great deal of learning about the customer, the market place, our retail partners, and the interface between the consumer, their apparel, and their equipment,” said Eckman.
“I could not be more proud of the team we have at Pearl Izumi or of our brand,” added an enthusiastic Eckmann. “We're very fortunate. We are also very happy with the response we have received from our retail partners; they were very happy to hear that we now have a home with Shimano.”
