In a move that has been the buzz of the industry for months, Finland-based Amer Group Plc announced Oct. 4 it is acquiring fitness equipment manufacturer Precor. The acquisition is one giant step forward toward the Amer Group's stated goal to become "the No. 1 sports equipment company in the world."
Precor joins the stable of Amer Group's other powerhouse companies: snowsports leader Atomic (with brands Koflach and Oxygen), sports electronics specialist Suunto, and Wilson Sporting Goods, a U.S.-based leader in team, racquet sports and golf.
"Precor fits perfectly into our strategy," Pekka Paalanne, Amer Group senior vice president and CFO, told SNEWS from Finland the day the acquisition was announced. "This step is certainly very important on that road to become No. 1. We are all excited about the future. It's a great match."
Amer Group (www.amersports.com) will pay approximately EUR 180 million (USD $176,364,000) for the acquisition, which is expected to be complete in November. Precor's annual sales in 2002 are estimated to be EUR 195 million (USD $191,061,000) and its operating profit EUR 24 million (USD $23,515,200). Although a part of the fitness equipment industry for more than two decades, it's only in the last six years -- since its introduction of the first elliptical -- that the Woodinville, Wash.-based, company jumped into a place among the top five.
"This is about becoming a leader in the fitness side," Chris Torggler, Precor vice president of commercial sales, told SNEWS. "The synergies we'll be able to develop are tremendous."
Amer Group doesn't mince around about its growth goals (as SNEWS reported only days earlier when we said we were putting our money on Amer after we originally reported on the company in August; click here for that story). Paalanne says Amer Group wants each of its brands to be a top player -- if not the top player -- in its segment. "We want to be one of the leading brands in all areas where we operate," Paalanne said. "That would be very nice."
Currently, approximately 20 percent of Precor's net sales come from markets outside North America, but that's one figure that will likely change -- upward. Paalanne said Precor will be able to tap into Amer Group's strong global distribution network to quickly reach broader markets worldwide. Precor now has offices in Germany and the United Kingdom.
Paalanne also named Illinois-based Life Fitness and Italian equipment leader Technogym as two of its major competitors, which the company would be eyeing closely.
"Life Fitness respects Precor's employees, products and technology," said Kevin Grodzki, president and CEO of Life Fitness, about the purchase and the company's goals. "We believe the Amer Group, which has a diverse set of brands and good brand management, can bring new dynamics to the fitness industry."
Being a part of a larger family of companies with related interests can also bring other synergies into play, Paalanne said, and offer opportunities to tie together their specialties.
"Suunto and Precor will find very interesting ways to work together," he said. Suunto specializes in wrist-top computers such as altimeters and heart-rate monitors.
The ball began to roll on Precor's rather surprising sale when its current owner Illinois Tool Works (NYSE: ITW) announced in mid-December it planned to divest itself of its consumer divisions, including Precor, West Bend appliances and Florida Tile. ITW acquired Precor in 1999. But details of any talks or suitors had been hush-hush since then, although rumors ran rampant in the industry, and included the likes of Nike, Icon and even Wilson. Paalanne said Amer Group began looking at Precor in March, approached ITW in April, and talked off and on until negotiations picked up speed in August -- along with industry buzz.
Buzz was taking a different tack in Europe, though, as the rumor there was that Amer Group was negotiating to buy the Benetton Sports brands, including Prince, Nordica and Rollerblade, European SNEWS sources have said. Although having likely expressed interest in the brands initially, Amer Group apparently pulled out quickly -- partly because of an asking price for Rollerblade it considered too high, and partly because owning Prince and Wilson could be interpreted as a monopoly and not allowed by the government, sources said.
"We're not going after Benetton," Paalanne told SNEWS, acknowledging it had taken a look but didn't find it attractive, "but we continue to look at some interesting opportunities."
In the Helsinki-based company's quest to be No. 1 in the world, Paalanne said the company would not act rashly and would instead carefully consider the logic of a brand and its fit with its current family and the price, both of which had to be right. He said the company expects no new acquisitions at least in the next six months.
Aside from sports and recreation companies, Amer Group also operates Finland's largest cigarette manufacturer, Amer Tobacco, which produces the nation's top-selling brand, L&M, as well as Marlboro, under license from Philip Morris. Amer Group is a public company, traded on both the Helsinki and London exchanges as AGPDY. Financial statements show the company at the end of its fiscal year in December 2001 had sales of 671.4 million GBP (USD $1.052 billion) showing growth over the previous year of 4.8 percent, had profits of 41.8 million GBP (USD $65.5 million) with a growth over 2000 of 2.1 percent, and employed 3,734 people, having increased that number over the previous year by 13.7 percent.
Paalanne said he expects no management changes or layoffs at Precor, and that business should continue as it has, with Paul Byrne, who was on vacation last week, remaining as president.
"Precor is a well-managed company, and it's profitable," he said. "We are looking forward to helping them grow the business and to be even stronger."
SNEWS View: What a great fit, both for Precor and Amer Group. Amer Group wants to help Precor build its brand and grow globally and has the resources to let it do that while staying hands-off, and Precor can now make giant steps against other industry leaders, Nautilus Group, Icon and Life Fitness. In fact, if we were one of those three, we'd be watching very, very closely and throwing a few looks behind us every few steps.
With this feather in its cap, Amer Group can now say it has a monumental stake in the sporting goods market with its ownership of leaders in many of the different segments -- taking it much closer to its goal to be No. 1 globally in sporting goods by 2004 (from an August company statement). And fitness was a superior next step for the Finnish company since it's the largest segment of the sporting goods industry in the United States, research has shown, and companies foresee massive growth in the next few years, particularly outside of the United States. No wonder most North America-based companies have made moves recently to stake their claim in Europe and Asia with offices and sale staff, particularly in the high growth areas of Germany, the United Kingdom and China.
Starting with Precor's introduction of three new treadmills at this week's Club Industry show in Chicago, we expect to see big things and plenty of new products for both retail and commercial coming in the next couple of years.