Quiksilver Inc.'s stock tumbled Tuesday after the surf wear company said it would buy French winter sports equipment maker Skis Rossignol for about $320 million in cash and stock.
Investors sent the stock down 10%, partly on concerns that the purchase would slow the Huntington Beach company's steady growth trajectory. Quiksilver shares closed at $29.74, down $3.46, on the New York Stock Exchange.
By acquiring Voiron, France-based Rossignol, Quiksilver would become a major player in the winter sports equipment arena, expanding its revenue by about 50%. Rossignol's sales were about $625 million in its last fiscal year and Quiksilver's were $1.3 billion. Quiksilver, the parent of youth apparel lines such as Quiksilver, Roxy and DC Shoe, would gain brands including Rossignol, Lange and Cleveland Golf.
The first step will be to begin cranking out more clothes bearing the Rossignol brand, a line that includes jackets, ski pants, sweaters and long underwear, Quiksilver Chief Executive Robert B. McKnight Jr. said. Rossignol could, for example, offer more styles in a wider array of colors or prints and at a greater selection of prices, he said.
"I think we can do that fairly quickly," McKnight said.
Under the terms of the deal, Quiksilver will buy a majority holding of the Rossignol Group, controlled by Laurent Boix-Vives, with 70% cash and 30% in Quiksilver shares. It will pay $25.50 a share for the minority shares. Quiksilver also will assume about $160 million in Rossignol debt. J.P. Morgan will finance the transaction, which is expected to close in Quiksilver's third quarter.
The Boix-Vives family will retain about a 35% interest in Cleveland Golf for at least 4 1/2 years and Laurent Boix-Vives will have a "key advisory role" with both Quiksilver and Cleveland Golf, Quiksilver said.
Analysts offered mixed responses to the much-anticipated announcement. Analyst Jennifer Black at Jennifer Black & Associates, called it "a brilliant acquisition."
"There are so many directions Quiksilver can take this acquisition, providing tremendous growth opportunity," she said in a report.
Lizabeth Dunn at Prudential Equity Group said in her report that Rossignol's sluggish sales in recent years could weigh on Quiksilver's growth rate. She trimmed her long-term growth-rate expectation for Quiksilver to 12% from 15%.
