VF Outdoor Inc., a subsidiary of VF Corp. (NYSE: VFC), has made it official that the company is in negotiation to acquire Eagle Creek. Eagle Creek will become part of the VF outdoor group, which includes The North Face, JanSport, Eastpak, Vans, Reef, Napapijri and Kipling.
"The reason we are announcing now that we are in negotiations, and not that a sale has been completed, is that we are an employee-owned company and our employees have to vote on this,” Steve Barker, founder and president of Eagle Creek, told SNEWS®. “We told our employees yesterday morning and once that was done, the deal was public."
Both Ricky Schlesinger, executive vice president, and Barker told us that the employees were naturally surprised, but ultimately seemed very supportive, although naturally all had questions regarding what this means to the their stock options and jobs.
"We saw the possibility of selling the company ten years ago when we set up the ESOP (Employee Stock Option Plan), and wanted to acknowledge that our company is where it is not because of huge capital investment, but because of the sweat of the employees who got us here," Barker told us. "It was important to us to recognize that and to give our employees something to retire on. All employees who have been with our company for more than a year will participate in this event."
While specific terms of the deal were not announced, VF stated that Eagle Creek currently has annual sales of approximately $30 million. Eagle Creek brand travel products are sold in the United States through 700 outdoor specialty and 300 luggage specialty accounts. The brand is also sold in Europe and in other international markets through distributors and licensees.
Schlesinger told us that the company expects the deal to be complete by Outdoor Retailer Winter Market in late January.
All management will remain intact, including Schlesinger and Barker, who have agreed to remain with the company for at least the next three years, we were told.
"We're excited at the prospect of adding the industry's authentic outdoor travel brand to our existing portfolio of outstanding brands," said Dave Gatto, president of VF Outdoor, in an official statement. "Growth in the travel category is outpacing growth of the total outdoor business, and we expect this to continue given the desirability of travel among both baby boomers and Gen Y consumers.
"Eagle Creek's strong product pipeline, combined with VF Outdoor's proven ability to execute international brand growth strategies, should enable the Eagle Creek brand to sustain high-single digit sales growth over the next several years," Gatto added.
VF approached Eagle Creek about selling because of the company's interest in the travel category, we learned. We also learned that VF believes Eagle Creek could be a $100 million company.
When asked why the company decided to sell now, Barker told us that because the company is doing so well, and is a category leader. That way, the brand can be taken to where it needs to be to continue leading and innovating.
"VF knows how to grow a brand and have done an excellent job when they have acquired other brands in the past of leaving the company's market teams intact and super charging them to they grow and flourish," said Barker. "We could have continued to grow without being acquired, certainly, but it was becoming increasingly difficult and stressful to finance operations and growth out of the company's back pocket."
Eagle Creek will remain based in Vista, Calif., and Barker will continue to manage the brand, reporting to Gatto. Schlesinger will also continue in his current role, reporting to Barker.
As for what retailers can expect from this, Schlesinger told SNEWS® that Eagle Creek hopes and believes it will allow the company to take a more aggressive approach regarding inventory positions, improving the company's ability to be able to deliver on time and keep more A-list items in-stock year round.
SNEWS® View: Ahhh, the very kind of holiday news we love to write! Congrats to Barker, Schlesinger and the entire Eagle Creek team. Your rewards are well-deserved and the industry owes a nod of appreciation to you all for establishing a category long ago that all now profit from.
We would expect that this deal will be very good for both Eagle Creek and for the industry, including reps and retailers. The one area we doubt VF will offer much benefit is in sourcing, since Eagle Creek currently enjoys a very unique and quite beneficial relationship with PK, who owns and operates for the company a dedicated factory in Ho Chi Mihn City, Vietnam. The factory is staffed with ex-pat Eagle Creekers and is one of the reasons that Eagle Creek has been able to remain ahead of the pack in terms of product innovation and product quality. Sure, it's not perfect, but compared to others that are constantly shifting production from one factory to another and never setting up a sourcing chain that is made stronger by bonds of loyalty and trust, it is darn near ideal. We don't expect VF to tamper with that golden goose one bit.
As for distribution expansion to get Eagle Creek to that magic $100 million number, look for increased voltage applied to driving international growth and little change in terms of modifying current distribution patterns in the United States.