Columbia Sportswear Company, a leading innovator in the global outdoor apparel, footwear, accessories and equipment industries, announced that it has signed a definitive agreement to acquire all controlling interests in prAna Living LLC from majority owner Steelpoint Capital Partners and all other minority members for $190 million in cash, which is subject to customary working capital adjustments. PrAna will join Columbia's portfolio of authentic, active outdoor brands, which include Columbia, Mountain Hardwear, Sorel and Montrail.
Highlights:
-PrAna is a rapidly growing lifestyle apparel brand that complements Columbia's portfolio of authentic, active outdoor brands.
-PrAna's sales grew at a compound annual growth rate of more than 30 percent between 2010 and 2013, and are on pace to surpass $100 million in 2014 and generate low double-digit operating margin.
-Purchase price of $190 million, which is subject to customary working capital adjustments, equates to approximately 13 times prAna's projected 2014 EBITDA.
-Acquisition expected to be accretive in first full fiscal year (2015).
-Existing seasoned management team to remain and drive continued growth rooted in prAna's core brand values of healthy, mindful living and sustainability.
-Transaction expected to close during second quarter of 2014, subject to customary conditions and regulatory approvals.
"We are very excited to welcome prAna to Columbia's brand portfolio," said Tim Boyle, Columbia's president and chief executive officer. "PrAna is a rapidly growing lifestyle apparel brand positioned at the intersection of today's healthy, active lifestyles and socially conscious consumerism. A growing number of women and men are embracing prAna's versatile products that are designed and manufactured with sustainability as a core value.
Boyle continued, "PrAna fits Columbia's strategic priorities to expand into categories that appeal to complementary consumer segments, reduce our dependence on cold-weather products, and leverage Columbia's global operational platforms to expand across key geographic markets.
"Of equal importance is the cultural fit and professional camaraderie we've found at prAna as we've worked with CEO Scott Kerslake and the prAna management team. We look forward to completing the transaction and teaming with them to unlock prAna's global brand potential."
Since its founding in 1992, prAna has been committed to inspiring healthy, active, free-spirited lifestyles rooted in yoga, rock-climbing and fitness, and reflecting values of social and environmental responsibility, community, service and optimism. PrAna sales grew at a compound annual growth rate of more than 30 percent between 2010 and 2013, and are on pace to surpass $100 million in 2014 and generate low double-digit operating margin.
PrAna's products are currently sold through select specialty and online retailers across North America, as well as company-owned direct-to-consumer channels that include 5 U.S. retail stores, a U.S. ecommerce site and direct-mail catalogs. Markets outside of North America currently comprise less than 5 percent of annual sales and represent a substantial opportunity to accelerate growth by leveraging Columbia's international relationships.
"We are thrilled at the prospect of joining Columbia's portfolio of distinct outdoors brands," said prAna's chief executive officer, Scott Kerslake. "PrAna is a brand founded on designing stylish, functional, active apparel made in an environmentally sustainable way. With Columbia's financial strength, operational expertise, and global market platform, we now will be able to reach a much broader audience of socially conscious consumers worldwide."
PrAna will remain headquartered in Carlsbad, California, and operate as a wholly owned subsidiary of Columbia Sportswear Company, with Kerslake continuing to serve as chief executive officer reporting directly to Columbia president and CEO Tim Boyle.
Columbia intends to fund the purchase from available cash and expects the transaction to close during the second quarter of 2014. Assuming the transaction closes in the second quarter of 2014, Columbia expects to recognize incremental prAna net sales of approximately $55 million over the remainder of 2014, which is expected to contribute low double-digit operating margin to Columbia's consolidated 2014 results, excluding the effect of one-time transaction fees, purchase accounting adjustments, and other integration costs. One-time transaction fees are expected to total approximately $4 million in 2014.
In addition, under GAAP purchase accounting methods, amortization of certain acquired assets and other integration costs are expected to total approximately $9 million in 2014. In 2015, Columbia expects prAna's annual sales to increase at a double-digit rate over 2014 and operating margin to be in the low-teens, excluding purchase accounting amortization and other integration costs of approximately $5 million, resulting in accretion to Columbia's consolidated earnings in 2015.
J.P. Morgan Securities LLC is serving as exclusive financial advisor to Columbia Sportswear Company in the transaction and Wachtell, Lipton, Rosen & Katz is serving as the company's legal advisor.
