In a surprise move, Columbia Sportswear (NYSE: COLM) announced late Tuesday that it had signed a definitive agreement to acquire yoga, climbing, and outdoor lifestyle apparel brand Prana for $190 million in cash.
The deal to buy Prana from its management team and private equity firm Steelpoint Capital Partners (which have owned the company since buying it from Liz Claiborne Inc. in 2008) is expected to close sometime during the second quarter 2014. It would represent the largest acquisition in Columbia's history.
Columbia, which also owns Mountain Hardwear, Montrail and Sorel, will keep Prana headquartered in Carlsbad, Calif, operating as a wholly owned subsidiary, and Prana's Scott Kerslake will remain as CEO, reporting directly to Columbia Sportwear CEO Tim Boyle.
“We are very excited to welcome Prana to Columbia’s brand portfolio,” Columbia CEO Tim Boyle said in a statement. “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 said the deal "fits Columbia’s strategic priorities to expand into categories that appeal to complementary consumer segments, reduce our dependence on cold-weather products [see recent SNEWS coverage of this trend], and leverage Columbia’s global operational platforms to expand across key geographic markets."
For Prana, Boyle added, the opportunity exists to unlock the brand's global potential. Prana's sales outside North America, consist of less than 5 percent of annual sales, officials said.
"We are thrilled at the prospect of joining Columbia’s portfolio of distinct outdoors brands,” Kerslake said in a statement. “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.”
Founded in 1993, Prana focuses on yoga and rock-climbing consumers. It sells its lifestyle and performance apparel at 1,400 specialty retail stores and has a direct-to-consumer channels online and through five physical brand stores in San Francisco, Portland, Ore. (home of Columbia), Denver, Boulder, Colo. and Minneapolis. Sales grew at a compound annual growth rate of more than 30 percent between 2010 and 2013, officials said. The company employs 163 people.
The sale price of $190 million is roughly 13 times Prana's estimated 2014 EBITDA earnings and nearly double the brand's annual sales, which are expected to surpass $100 million in 2014. Columbia intends to fund the purchase from available cash, and projects about $55 million in extra revenue to its books for the remainder of the year. In 2015, Columbia expects Prana's annual sales to increase at a double-digit rate over 2014, 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.
Columbia made the announcement in conjunction with its first-quarter 2014 earnings report, which beat expectations. Quarterly sales jumped 22 percent to $424.1 million, compared to a year ago, and net profit more than doubled to $22.3 versus $10.1 million during the first quarter 2013. The Columbia brand led the way, rising 25 percent in sales, Sorel rose 4 percent and Mountain Hardwear inched up 1 percent. The overall rise was thanks to higher wholesale and direct-to-consumer sales worldwide, Boyle said, including the company's new joint venture in China. The company raised its 2014 revenue-rise projections to the 16-18 percent range, excluding the Prana acquisition.
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