Jack Wolfskin has reached an agreement to buy out its Chinese distributor and licensee over the next two years to clear the way for a new subsidiary it will establish in the People's Republic of China, or PRC.
In exchange for a two-year agreement to provide JW PRC Co. with consulting and management services, Tri State Holdings Limited of Hong Kong agreed Dec. 24 to relinquish licenses held by its wholly owned subsidiaries to distribute Jack Wolfskin products in the PRC, Hong Kong and Macau and manufacture Jack Wolfskin branded T-shirts/Polo shirts in the region. The licenses were set to expire in December and July of next year respectively.
Jack Wolfskin is Germany's largest domestic outdoor brand, but reported lower sales in 2013 due to growing competition in both its home market and greater Europe.
Under the new agreement, Tristate's Shanghai affiliate will provide consulting services to JW PRC Co until December, 2017. During the period, Jack Wolfskin will pay Tristate Shanghai a service fee amounting to substantially the entire pre tax and interest earnings of JW PRC Co for the period from termination to Dec. 31, plus an additional service fee which will be determined based on certain agreed percentages of the gross profits of JW PRC Co in 2016 and 2017. Tristate, which distributes products and runs retail operations for multiple brands, will also be re-appointed as a distributor of the “Jack Wolfskin” branded products in Hong Kong and Macau.
In exchange, Shanghai Tristate will advise and assist JW PRC Co on the development, procurement, sale and marketing of the Jack Wolfskin branded products in the PRC; help formulate and implement a growth strategy; and work with JW PRC to bring over as many of its franchisees, employees and offices as possible during the two-year transition period. At the end of the period, JW PRC will acquire relevant inventory at landed cost.
The agreement is conditional upon Jack Wolfskin establishing and obtaining all required legal and regulatory approvals for its operations in the PRC.
With annual garment exports exceeding $300 million, Tristate manufactures a broad range of apparel ranging from formal and office wear, including suits, to casual and athletic clothing. The Group owns and operates 10 factories with modern production equipment situated in Mainland China, Philippines, Thailand and Vietnam. It also runs a sourcing and trading division as well as distributed brands products in mainland China. Its shares are listed on the Stock Exchange of Hong Kong Limited.
