Arc'teryx's parent company IPO, but Anta has to wait if it wants to make money

The "middle-class three-piece set" is on fire, and Archaeopteryx is really going to be on the market. On January 8, a reporter from Beijing Business Daily learned that Amafen Sports, the parent company of Arc'teryx, applied for listing on the New York Stock Exchange, and the independent listing plan that had been passed on and off for almost two years finally landed. Although the popular "middle-class three-piece suit" Amalfen occupies two seats, the status quo of continuous losses has not changed, and Anta has to wait if it wants to make money through Amalfen. However, Anta seems to care more about whether Amalfen can promote Anta to the international market than making money.

Capital compromises with each other?

From the original "not commenting on market rumors" to now being publicly listed, the plan for Amalfen's independent listing has finally landed. On January 8, a reporter from Beijing Business Daily learned that Amalfen has applied for listing of common shares on the New York Stock Exchange with the stock code "AS", and the number and price range of shares to be issued have not yet been determined. Goldman Sachs L.L.C., BOFA Securities, JPMorgan Chase & Co. and Morgan Stanley acted as joint underwriters.

Regarding the relevant listing issues, the relevant person in charge of Anta told a reporter from Beijing Business Daily: "The prospectus and the announcement of Hong Kong stocks shall prevail. ”

Amalfen is a Finnish sporting goods company founded in 1950 and previously listed on the Helsinki Stock Exchange in 1977. However, after being acquired by a consortium of investors composed of Anta Sports, FountainVest Capital, Anamered Investments and Tencent for 4.6 billion euros in 2019, Anta Group led the development.

Ding Shizhong, Chairman of the Board of Directors of ANTA Group, has said that in the past 30 years of development, the acquisition of outdoor sports brands such as Amalfen has been one of the major strategic decisions.

In fact, in the five years since Anta's acquisition, Amalfen's development has been quite impressive. Especially in the "middle-class three-piece suit" that has been popular in the past two years, the brands of Amalfen occupy two seats, and the jacket of Archaeopteryx and the sneakers of Salomon have also made Amalfen a hot sports brand in the Chinese market.

According to the financial report data disclosed by Amalfen, from 2020 to 2022, Amalfen's sports revenue will be US$2.446 billion, US$3.067 billion, and US$3.549 billion respectively, with a total revenue of more than US$9 billion, with year-on-year revenue growth of 25.39% and 15.72% in 2021 and 2022, respectively. Compared with before the acquisition, the revenue growth rate of Amalfen Group in 2017 and 2018 was only 4% and 7%, respectively.

Wu Daiqi, CEO of Shenzhen Siqisheng Company, said: "Promoting the listing of Amalfen Sports has certain advantages for ANTA, as Amalfen's brands belong to different sports segments, such as skiing, marathon and tennis, which are all emerging sports and have also attracted much attention. If the company is successfully listed and gets more funds, it is expected to expand the entire business. ”

In the view of Cheng Weixiong, founder of Shanghai Liangqi Brand Management Co., Ltd., a senior brand management expert, the independent listing of Amalfen is definitely good for Anta, and for the current domestic and international market situation, the natural risk of separate operation and listing is greatly reduced, otherwise Anta's financial pressure is not small, especially the performance and development of the global Amalfen after the acquisition has not reached the expected goal, and from the current market value, Amalfen is helpless to go public, and it cannot be ruled out that it is the result of mutual compromise of capital.

It is understood that the goal of the Amalfen IPO is to raise more than 1 billion US dollars (about 7.1 billion yuan), and the company's valuation may be as high as 10 billion US dollars after listing. The $1 billion will also be used primarily to repay the debts of the controlling shareholder. According to public data, as of September 30, 2023, Amalfen's largest debt came from related party loans, more than US$4 billion, the vast majority of which came from the controlling shareholder, that is, a consortium of investors led by Anta Group.

Is internationalization more important than making money?

In fact, Amalfen is nowhere near as beautiful as it seems.

In the five years since Anta's acquisition, Amalfen's loss status has not changed substantially. According to the performance data disclosed in the prospectus, from 2020 to 2022, the net loss of Amalfen was US$237 million, US$126 million, and US$253 million respectively. In the first three quarters of 2023, the loss was $113.9 million, widening further from the loss in the same period last year.

Cheng Weixiong said that Anta seems to be developing very well at present, but if it cannot let Amalfen embark on the road of profitability, Amalfen will be a big burden for Anta, and there will be a challenge to explode at any time.

Although Amalfen has brands such as Arc'teryx and Salomon with high-end positioning, from the perspective of gross profit margin, it has not reached the premium of high-end or even luxury brands. According to the prospectus data, from 2020 to 2022, the overall gross profit margin of Amalfen expanded from 47% to 49.7%. As of the first three quarters of 2023, its gross profit margin has only increased to 52.2%. Looking at Fila, its gross profit margin has been maintained at 65% for many years, and Anta's overall gross profit margin has basically remained above 60%.

Cheng Weixiong said that from the perspective of gross profit margin, there are many brands under Amalfen, and the income of each brand varies greatly, and the input and output are not proportional, that is to say, it looks gorgeous on the surface, but in fact, Amalfen's global internal operation ability is not good, and the gross profit is similar to that of domestic mass brands, and it is difficult to reach the premium of high-end and even luxury brands.

Obviously, it is too early for Anta to make money on Amalfen.

However, for Anta, it seems more important to rely on the influence of Amalfen in the international market to go out than to make money.

In 2021, ANTA released its new 10-year strategy, upgrading its strategy from "single-focus, multi-brand, and omni-channel" to "single-focus, multi-brand, and global". This year, Anta's revenue surpassed that of Adidas China. For ANTA, the desire to go out and compete with international brands such as Adidas is also getting stronger and stronger.

In 2023, Anta released its development plan for the next three years and stated that in the next three years, Amalfen Group will continue to strengthen its three major markets in China, North America and Europe, promote five "1 billion euros" strategies, and establish global leading positions for its core brands in their respective segments. At present, ANTA Group and Amalfen Group have formed a "two-wheel drive" global strategic layout.

In other words, Amalfen does not carry the single goal of making profits, but also carries the role of a bridge for Anta to go global.

In fact, Anta has been laying the foundation for globalization even earlier, and frequent acquisitions of foreign brands are only the first step. In 2009, ANTA acquired FILA's franchise rights in Chinese mainland and Hong Kong and Macau; in 2015, ANTA acquired Sprandi, a sports and leisure brand located in Russia and Eastern Europe; in 2016, ANTA acquired Descente's exclusive operation, product design, sales and distribution business in China; in 2017, ANTA acquired KOLON, a high-end outdoor brand; in 2019, ANTA acquired Amalfen Sports Group, combining Arc'teryx, Salomon and other well-known brands are under the command.

Cheng Weixiong said that the separate listing of Amalfen is also an international consideration for Anta, and Anta's multi-brand matrix in China is enough to do a good job in the Chinese market, but the development of Amalfen in the global market is not smooth, so Anta has brought capital to eat Amalfen, but how to better digest Amalfen is directly related to the progress of Anta's globalization.

Beijing Business Daily reporter Guo Xiujuan Zhang Junhua