Apparel giant E-Land Group inked a deal on Thursday to acquire Nasdaq-listed U.S. footwear company K-Swiss, Inc. for $170 million, becoming the first Korean company to buy a listed American fashion firm.
Through taking over K-Swiss, which saw its sales halve from 2005 to around 600 billion won in 2011, E-Land plans to beef up its footwear line and business in China.
About half of K-Swiss’ sales come from the U.S., and the other half from Europe and Asia.
“By expanding our sports brand business from the U.S. to China and other parts of Asia, we plan to foster K-Swiss into one of the world’s top three sports brands along with Nike and Adidas,” said an E-Land official.
E-Land has the sales rights for New Balance and Nike Golf in China.
E-Land, which plans an initial public offering of its Chinese unit ― E-Land Fashion China Holdings ― in Hong Kong this year, is unlikely to have problems in financing the acquisition of the debt-ridden K-Swiss, according to Byun Jung-hye, credit analyst at Shinhan Investment Corp.
“When we asked E-Land about its rising debts, they pointed to the planned IPO in Hong Kong. Their Chinese arm, wholly-owned by the group’s holding company E-Land World, generated sales of about 2 trillion won last year, with around 300 billion won in earnings before interest, tax, depreciation and amortization,” Byun said.
“The price-earnings ratios of women’s apparel companies in China range generally between 12 and 15, so if E-Land Fashion China Holdings achieves a PER of around 10 on the Hong Kong bourse, its market value would amount to nearly 3 trillion won.”
As long as E-Land does not seek absurdly large mergers and acquisitions such as Ssangyong Engineering and Construction, taking over fashion brands would be viable and helpful for the fashion retailer’s business, Byun said.
“K-Swiss is not exactly a popular brand in Korea, but selling it in outlets run by E-Land Retail would work,” she added.
E-Land has shown great appetite for footwear brands.
After it acquired the sales license for New Balance, the sports shoes brand became a cash cow generating over 300 billion won in sales. E-Land bought other shoes brands such as Italy’s Lario 1898 in 2011 and Korea’s Elcanto last year.
E-Land also took over a number of European fashion brands such as Mandarina Duck, Belfe and Coccinelle since 2010. Mandarina Duck is selling well in China.
Established in 1966, K-Swiss has a market cap of around $113.6 million. Most of its stocks are owned by institutional investors such as Fidelity.
By Kim So-hyun (
sophie@heraldcorp.com)
