Arc'teryx is listed at 70 billion, how long can Anta's M&A road go?

镜观台（ID:JINGGUANTAICN）原创

Text丨Zhao Zixin

Editor丨Cao Huimin

"Not to be China's Nike, but to be the world's Anta", Anta's dream is becoming a reality with Amer Sports (hereinafter referred to as "Amer Sports"), the parent company of Arc'teryx.

On January 22, Amalfen, a subsidiary of Anta, announced that it plans to be listed on the New York Stock Exchange, planning to issue 100 million shares at US$16 to US$18 per share, that is, to raise up to US$1.8 billion. It is expected that the company's valuation will be as high as US$10 billion (about 70 billion yuan) after listing.

If the listing is successful, Amalfen is expected to become the largest IPO project in the U.S. stock market in 2024.

Perhaps Amalfen is not well-known, but the "middle-class three-piece suit" that is passed on by word of mouth - Lululemon's yoga pants, Salomon's sneakers, and Archaeopteryx's jacket, of which Archaeopteryx and Salomon are all brands of Amalfen.

Five years ago, Anta embarked on a "snake swallowing elephant" type of acquisition, with the lead investor spending about 36 billion yuan to acquire Amalfen.

Today, Anta is rapidly rising as the "king of mergers and acquisitions".

ANTA Group's "buy, buy, buy" journey began with the acquisition of FILA in 2009. After FILA, ANTA has acquired brands such as the well-known Japanese ski brand DESCENTE, the South Korean outdoor brand Kolon, and the parent company of the Canadian outdoor sports brand Arc'teryx. According to Anta's 2023 interim report, Anta holds 52.70% of the shares of Amalfen and is the largest shareholder of Amalfen.

ANTA has successfully revitalized FILA, and has successively ignited the market heat of brands such as Arc'teryx and Salomon, becoming a popular "hot style maker" for the middle class. However, many consumers queuing at the gate of Arc'teryx did not know that these brands that exploded on the Internet actually belonged to Anta Group.

Most importantly, the successful acquisition of these high-end brands has become the key for Anta to surpass Adidas and Nike.

"Nike and Adidas used to keep us up at night, now it's their turn. This declaration by Ding Shizhong, founder of ANTA, is gradually becoming a reality.

As early as the beginning of the acquisition of Amalfen, Anta put forward an ambitious "five billion euros" goal, that is, to build the three brands of Arc'teryx, Salomon and Wilson into "1 billion euros" brands, and achieve 1 billion euros in revenue through the Chinese market and direct sales model respectively.

Prospectus Data

Source/Screenshot of the Mirror Observatory

ANTA is helping to achieve this goal through long-term operation and marketing.

In 2022, Anta Group's total revenue reached 53.6 billion, surpassing Nike China, and even surpassing the sum of Li Ning and Adidas China. This achievement highlights its focus on the expansion of market segments and brand influence.

In terms of building brand influence, ANTA has enriched its brand matrix through mergers and acquisitions of well-known brands and driven the influence of its own brands.

Domestic counterparts such as Li Ning, Xtep, Youngor, and Bosideng have also begun to follow suit, competing to acquire overseas brands to target the huge potential of the domestic market.

However, this approach is not all good. The explosion of the sub-brand contrasts with the relative weakness of the main brand. The blind pursuit of acquiring high-end brands may make it difficult to separate the main brands in the sinking market.

Anta is looking for the next brand that may become popular, but it doesn't know how long it can go to build a blockbuster through acquisitions.

Famous for Archaeopteryx

"Three treasures of the contemporary middle class, Lulu Salomon Archaeopteryx. ”

Of course, in addition to the well-known Archaeopteryx and Salomon, Amalfen Sports also includes tennis and other sports equipment brand Wilson, Nordic hiking brand Peak Performance, ski brand Atomic and Armada, softball brand Atec and many other high-end brands.

In the domestic market, what makes Amalfen famous is none other than the top Archaeopteryx.

Archaeopteryx closely follows the concept of "sports luxury" and has evolved to "outdoor top luxury", which has swept the country everywhere.

Originally mainly purchased by middle-aged men and outdoor enthusiasts, Archaeopteryx was rated as the first echelon of the outdoor brand rankings by the public, and Archaeopteryx suddenly became a symbol of "row noodles" and "middle class".

"People who have birds don't want to talk to people who don't. This is a popular phrase on the Internet. Pony, a loyal Arc'teryx user, told Mirror Observatory that he mainly valued the workmanship and fabric of the Archaeopteryx, "How happy it is to have a windproof, rainproof and waterproof Archaeopteryx on rainy and snowy days." ”

In the past two years, as the styles and colors of Arc'teryx have become more trendy, the consumer group has also begun to change from outdoor enthusiasts to fashion trendsetters.

Fashion KOLs and celebrities' outdoor outfits emerge in an endless stream, once again making Archaeopteryx out of the circle quickly, and popular products are in short supply.

Consumer Yu Lu said to the mirror viewing platform that she had taken a fancy to a hot-selling jacket before, but she didn't squat online and offline for a long time, and she reluctantly said, "Every time it is new, it sells quickly, and I can't always buy what I want to buy, and I can't buy it with money." ”

On New Year's Day this year, Archaeopteryx "Year of the Dragon Limited" once again swiped social networks. On the first day of sale, the jackets and T-shirts, which were claimed to not be restocked, were sold out at 10 o'clock in offline stores and sold out in less than 5 minutes.

Yu Lu also went to join in the excitement, got up early in the morning and rushed to the offline store, only to find that "members can queue for three hours for limited purchases, and many people queue for three and a half hours to grab a set." ”

The original price of 8,200 yuan for the Archaeopteryx "Year of the Dragon Limited" jacket has now been fried on the second-hand platform to nearly 20,000 yuan, and the premium is far more than doubled.

Archaeopteryx "Year of the Dragon Limited" second-hand market situation

Source/Screenshot of the Mirror Observatory

With the booming trend and marketing strategy of outdoor sports, Arc'teryx has become a middle-class spiritual symbol, and the price of the product continues to increase.

Recently, Arc'teryx officially announced that it will increase the retail price of products across the board from February 15, 2024, including brand-operated stores and online malls, with an average increase of about 20% to 30% across the board.

The Archaeopteryx craze set off by countless middle-class people is actually contributing to Anta.

A brand of Amalfen Sports

Source/Screenshot of the Mirror Observatory

A series of operations after Anta's acquisition of Arc'teryx not only made Arc'teryx more famous, but also more expensive.

With ANTA's excellent marketing capabilities, it successfully transformed FILA, which lost more than RMB 30 million, into a leading sports fashion brand in China. When operating Arc'teryx, Anta replicated the same strategy.

ANTA has taken Hermès as a benchmark in marketing and successfully positioned Arc'teryx as an "outdoor luxury". The choice to open an Arc'teryx store near Hermès' flagship store further strengthened its high-end brand image.

Arc'teryx's after-sales service also draws on the model of luxury brands. For example, Arc'teryx's flagship store in WF Central became the first store in Asia to offer an on-site after-sales service, and in 2020, the company reclaimed the rights to operate Arc'teryx's outlet and online stores, and managed all inventory in one place.

Not only that, by inviting well-known celebrities and fashion industry figures to endorse Arc'teryx, the brand not only has a place in the outdoor sports world, but also adds more fashion elements.

In just five years, ANTA has successfully transformed an originally niche outdoor sports brand group into a leading enterprise with significant influence in the outdoor field.

According to the prospectus, the number of store members in the Arc'teryx area was only 14,000 in 2018, and it has reached 1.7 million in 2023. As of September 30, 2023, there were 63 Arc'teryx self-operated retail stores in Greater China.

From 2020 to 2022, Amalfen's revenue in Greater China increased from US$202 million to US$524 million at a compound annual growth rate of 60.9%, and the proportion of revenue increased from 8.3% to 14.8%, and in the first three quarters of 2023, revenue in Greater China surged by 67.6% year-on-year to US$593 million, exceeding the revenue scale in Greater China for the whole year of 2022.

The "King of Acquisitions" buys, buys, buys

In the past ten years, Anta, which has a grassroots image, has unexpectedly brought many high-end brands under its command.

From 2009 to 2019, ANTA invested more than RMB 22 billion in the acquisition of a number of foreign sports brands.

In 2009, Anta first spent 332 million yuan to acquire the Chinese business of the Italian sports brand FILA from Belle International, and in 2016, Anta acquired the British leisure sports brand Sprandi, followed by the acquisition of the South Korean high-end outdoor brand KOLON SPORT a year later.

In 2019, Anta joined forces with FountainEst Capital and other consortiums to acquire Amalfen at a price of 4.6 billion euros (about 37.1 billion yuan). In October 2023, Anta made its first move into a domestic sportswear brand, announcing that its wholly-owned subsidiary would acquire a 75.13% stake in Mayia Apparel.

As founder Ding Shizhong said: "With the brand operation capabilities of today's Chinese companies, the possibility of making a starting bird or a Wilson in 30 years is almost zero." Through acquisitions and the Chinese market as a potential growth space, it may complete a rebirth. ”

Through these acquisitions, ANTA has built a comprehensive brand matrix covering from fashion to professional, from mass to high-end, and broadened its influence in market segments.

ANTA Brand Matrix

Source: ANTA's official website

Bao Ma Xiao Nan told Jingguantai that she likes to buy Anta products for her children, and has also noticed Anta's expanding market layout, "I gradually found that the people around me who wore Nike and Adi were replaced by FILA and Anta, and the shoes of my children's junior high school classmates were basically all Anta, and the quality of clothes and pants was also very good." ”

Looking back, ANTA has indeed relied on its own strength and multi-brand management capabilities to inject new vitality into these brands in the Chinese market.

In 2021, ANTA's new ten-year plan was upgraded from "single-focus, multi-brand, and omni-channel" to "single-focus, multi-brand, and globalization". After the plan was upgraded, the importance of its global strategic layout was highlighted.

The acquisition has also become a key step for ANTA to achieve its global strategic layout.

Through the acquisition of high-end outdoor brands such as Amalfen, ANTA has not only captured the high-end outdoor market in China, but also laid the foundation for its global expansion strategy. This strategy not only involves brand operations, but also the integration of technology, management and market experience, which is crucial to ANTA's global development.

Taking advantage of the listing of Amalfen in the United States, the Anta brand also took the opportunity to enter the American market. Recently, ANTA brand CEO Xu Yang announced at a public event that he plans to officially enter the U.S. market on March 6, 2024, and will hold a series of promotional activities in various cities including New York, Los Angeles, Beijing and Shanghai.

This marks another important attempt by the ANTA brand to expand its global footprint since entering the Southeast Asian market.

How far can the acquisition go

Anta's acquisition of Amalfen set a record for the "largest acquisition" in the history of China's apparel industry and sporting goods industry. But at that time, it also aroused questions from the outside world about Anta's "inadequacy".

Judging from the actual situation of subsequent development, Anta's vision has gradually been recognized by the market. Acquisitions in recent years have not only boosted ANTA's profitability, but also enabled it to achieve significant results in multiple market segments.

As the national tide gradually recedes, the domestic sports brand market is undergoing a major reshuffle, and the competition is increasingly inclined to the stock market.

ANTA's successful counterattack highlights the importance of seizing the moment and formulating the right strategy.

On the one hand, ANTA has effectively differentiated its brands through precise brand positioning and effectively avoided the internal consumption of resources that may occur under the multi-brand strategy, and on the other hand, it has successfully entered the target market by creating independent sub-brands with distinctive characteristics.

After Anta's success, everyone wanted to become Ding Shizhong.

Other major domestic sportswear brands, such as Li Ning, Xtep, Youngor, Bosideng, etc., have also begun to actively participate in the acquisition of internationally renowned brands to enrich their own brand matrix.

However, behind Anta's aggressive expansion, new risks are quietly emerging.

Anta tried to use Amalfen to capture China's high-end outdoor market and shoulder the mission of overseas expansion, but this was not an easy task.

First of all, it cannot be ignored that Anta has an excessive financial burden. Despite the continuous growth of revenue, Amalfen is still in a state of continuous loss.

The prospectus disclosed that from 2020 to 2022 and the first three quarters of 2023, the net loss of Amalfen was US$237 million, US$126 million, US$253 million and US$114 million respectively, with a cumulative net loss of 730 million yuan. So far, Amalfen has not been able to turn a profit.

Amalfen continues to lose money, mainly because it has to repay a certain amount of interest every year. Since the acquisition, Amalfen's day-to-day operations have been largely sustained by large-scale loans.

At the same time, the acquisition strategy has also brought a high debt ratio to ANTA. At that time, the huge amount of money from the acquisition of Amalfen made Anta heavily indebted.

From 2019 to mid-2023, Anta's total debt value surged from RMB7.85 billion to RMB30.88 billion. At present, although the debt-to-asset ratio has dropped to 36.9%, it is still higher than the industry performance.

At present, the listing of Amalfen is also to a certain extent to reduce debt pressure.

In this regard, consumer expert Xiao Zhuqing told Jingguantai that Anta's international M&A and development strategy actually faces other risks. The laws and regulations, consumption logic and cultural differences in each country may cause difficulties in ANTA's internationalization strategy, and at the same time, the uncertainty of the global economy also brings hidden dangers to its international expansion. In addition, the localization of talents is also an area that ANTA needs to further strengthen.

At the same time, although ANTA has achieved good results through its multi-brand strategy, this strategy has also brought new challenges.

The prominence of the sub-brand has brought a new impact to the main brand, and the main brand Anta has shown that it cannot keep up with the group's development.

In the first half of 2023, the revenue growth rate of ANTA's main brand fell to 6.1% from 26.3% in the same period last year. In the fourth quarter of 2023, the positive growth of 10%-20% in the ANTA brand continued to be relatively weak, with FILA's retail sales achieving a positive growth of 25%-30% year-on-year and other brands' retail sales also achieving a positive growth of 55%-60% year-on-year.

The main brand is weak, but the sub-brand is rising strongly, and the problem of "top-heavy" is becoming more and more obvious. The strategic pursuit of multiple brands may also lead to the dispersion of resources.

The main brand is relatively weak, and in order to maintain its leading position in many fields, Anta may fall into a cycle of continuous search for the "next Archaeopteryx". However, with the emergence of more and more imitators, whether the manufacturing method of ANTA's popular brand can be sustainable, and how to find the next Arc'teryx? may be a difficult problem for ANTA.

At the same time, Anta is also facing pressure for further changes in its main brand.

In October 2023, ANTA's main brand proposed a new strategy, the biggest change of which is to put forward "mass positioning". Xu Yang, CEO of ANTA, said, "The final result of the strategic adjustment should be to strive for a larger market share in the mass market. ”

At a time when substitution and rational consumption have become the mainstream trend of consumption, ANTA's main brand has begun to regain its "mass positioning" and pursue cost-effectiveness, which may be a turning point.

Resources:

"Anta is playing a big game of chess" Source: 300 million generations;

"Why did Anta bet on it right again?" Source: DataVision.

*Unless otherwise specified in the article, "yuan" means "yuan".

*The title image and the accompanying text are from Visual China.

*Xiao Ma, Yu Lu, and Xiao Nan are pseudonyms.

*Disclaimer: Under no circumstances does the information or opinions expressed in this article constitute investment advice to any person.