Dual ASX/NZX-listed outdoor equipment and clothing retailer Kathmandu Holdings is set to acquire surfing brand Rip Curl for A$350 million ($368m).
Kathmandu has entered into an agreement with the Australian retail company known for its trendy wet suits and beach-inspired apparel, founded in 1969.
Christchurch-based Kathmandu says the Rip Curl acquisition creates a $1 billion opportunity for the company together with its Oboz Footwear brand.
The transaction is to be financed through a fully written "accelerated entitlement offer" to raise $144.5m, and a placement of approximately $32m of Kathmandu shares to the founders and CEO of Rip Curl. About $230m will be funded through secured debt facilities.
The transaction will require shareholder approval at a special meeting scheduled for October 18. If approved, it is expected to be completed by the end of the year.
The acquisition is expected to lift Kathmandu's earnings by 10 per cent in the 2020 financial year.
READ MORE: • Kathmandu considers US expansion after Oboz purchase
Rip Curl was founded by surfers Brian Singer and Douglas Warbick in Bells Beach, Victoria. The retail and wholesale brand has a long history of surfing and has sponsored some of the world's top athletes, including up-and-coming talent. The brand has enjoyed success in North America and Europe, as well in Australasia.
With Rip Curl, Kathmandu will own and operate more than 340 stores, including 254 licensed Rip Curl stores and have relationships with over 7000 wholesalers.
In a statement, Kathmandu chief executive Xavier Simonet said the acquisition was "fantastic" and would allow Kathmandu to "grow and diversify".
"The acquisition of Rip Curl transforms Kathmandu into a NZ$1b outdoor and action sports company, anchored by two iconic global Australasian brands," Simonet said. "The combination of Kathmandu, Oboz and Rip Curl achieves diversification in product, channel, geography and seasonality, and creates a platform for the acceleration of our brands' global expansion into new channels and markets.
"Importantly, there is also strong cultural alignment between our brands, underpinned by a shared focus on quality, innovation and sustainability."
Michael Daly, chief executive of Rip Curl, said the company was excited about the opportunity to "partner" with Kathmandu.
"We look forward to continuing to grow the Rip Curl brand as part of
the Kathmandu Group," he said.
Daly will continue to lead Rip Curl from the company's headquarters in Torquay, and report to Simonet.
"We wish to acknowledge the role that Rip Curl's founders have played in building the iconic status of the Rip Curl brand internationally as well as its unique cultural identity, and are pleased that the founders and CEO wish to remain invested in the ongoing success of Rip Curl under Kathmandu ownership," Simonet said.
Kathmandu has been on an acquisition drive in recent years. The company founded in Christchurch in 1987 acquired American footwear brand Oboz in the first-half of last year.
Harbour Asset Management managing director Andrew Bascand said the deal was significant, and a smart move as the two companies shared similar ethos.
The Rip Curl brand would also grow Kathmandu's millennial customer base, he said.
"When you think about Kathmandu, it's one of those iconic brands with great geography in Australia and New Zealand, and now through the Oboz transaction in America, [this deal] gives Kathmandu Group new geography," Bascand said.
"Kathmandu is a winter outdoors brand whereas Rip Curl is a summer beach brand and so that combination is quite complimentary, there are very few overlaps."
New Zealand merino wool clothing retailer Icebreaker, founded by Jeremy Moon, was sold to US giant VF Corporation, which owns The North Face, Timberland and Vans, for $288m at the end of 2017.
The Rip Curl acquisition is worth around $80m more.
Bascand said the acquisition package was "fair".
"It looks very fair for both parties," he said. "Kathmandu will now be a company with over a billion dollars worth of sales, and when you look at this transaction from that perspective, this looks very attractive for Kathmandu to get to that sort of size.
"I'm impressed with Kathmandu management ... The Oboz deal has gone really well in the last year and so they've definitely earned the right to go again with this acquisition.
"Often we see New Zealand and Australian companies buy other companies overseas and they trip up in the first year - that hasn't been the case with Oboz."
Kathmandu has been contacted for further comment.