In the second significant outdoor industry acquisition in as many weeks, Timberland inked a definitive agreement to purchase all of SmartWools outstanding stock from two private equity investment groups for roughly $82 million in cash. SmartWools 2005 revenues are expected to be $42 million.
This deal is one of the largest the outdoor industry has seen in quite some time with Timberland paying almost two times revenues; however sources close to the deal say that SmartWools profitability is the main reason behind such a high valuation.
Timberland is not revealing any profit numbers for Smartwool, but the EBITDA multiple was said to be “on the high end but not on the extreme high end” of other industry deals. However, even with 20% operating margins, the price tag is roughly 10X EBITDA, surpassing every outdoor apparel deal in the past three years.
The main opportunity for SmartWool is international expansion. While Timberland will maintain Smartwools existing distribution for its core sock products domestically, they do see the opportunity for a more segmented distribution strategy, especially with SmartWools new casual sock line.
Timberland will operate Smartwool as an independent subsidiary and the company will remain in Steamboat Springs, CO, with company President and CEO Chip Coe reporting to Timberlands SVP of supply chain and GM of the Performance Outdoor division, Gary Smith.
Editors Note — Look for more on both of these stories, including interviews with Mr. Smith and Mr. Coe, in this weeks issue of The B.O.S.S. Report. Subcribers can download the latest issue at:www.TheBossReport.com
