Two months after Gaiam's quiet acquisition of Spri Products, Spri President Herb Flentye told SNEWS® the partnership made sense and will help Spri take bigger steps into the broader retail arena.
So understated was the acquisition -- the only public notice was a short discussion in Gaiam's quarterly financial call with analysts March 10 -- and so non-existent has been Spri's talk about it, that Flentye admitted the company is still getting around to talking to customers and others. No official releases have been done, and there was no word about the deal on either website as of May 16.
"Gaiam was a great fit -- strategically, tactically, emotionally," Flentye said. "They believed in what we're doing and they respected what we had."
The deal came partly because of the recent sudden deaths of two of the three partners -- the main Spri "ambassador" Steve Block on Dec. 30, 2004 (click here to read a SNEWS® story), and the second co-owner last summer, Flentye explained. With only one left, Scott Swanson, the company realized changes were in its future. Although it had been approached before to be acquired, he said, Spri hadn't been looking. Last fall, the company reassessed and that changed. Swanson left the company at the time of the acquisition.
As is typical in acquisitions of smaller companies by larger ones, Spri will have help with basic operations and logistics, such as distribution, warehousing, human resources and other similar areas. Flentye doesn't hesitate to admit that help with infrastructure will come in handy, and that customer service should also improve. But after only two months, he said it was difficult to be specific about other possible changes.
"It's early as far as the brands go," he said, referring to any possible crossover or changes in product or branding. "I believe it is the intention to grow them both" in their appropriate channels.
He said that doesn't mean Spri will appear in discount chains, as Gaiam does, but that it could spread into higher-end sporting goods stores. The relationship will also allow Spri to become more involved in retail avenues; although at retail, including specialty, the company's main focus has always been commercial and club, including working with instructors and trainers directly.
"We're not going to lose sight of our commercial channels and fitness specialty," he said. "We know how supportive they've been."
Gained is clout in being part of the large Gaiam "lifestyle company" enterprise (Nasdaq: GAIA), where revenues were up 11.5 percent at the end of the quarter ended March 31, hitting $65.2 million. Gross profit also increased to $41 million, which at 62.9 percent of revenue was slightly down due to investment in the lower-margin solar business. Gaiam calls itself a lifestyle and wellness company. It has a large media division and, per the company history on its website (www.gaiam.com), "is a provider of information, goods and services to customers who value the environment, a sustainable economy, healthy lifestyles, alternative healthcare and personal development."
At the time of the acquisition, Gaiam President Lynn Powers said in the quarterly financial call, "This acquisition offers a variety of synergies, Spri's expertise and marketing in the professional fitness world, including personal trainers and health clubs is a strong complement to Gaiam's consumer-oriented business and a tremendous cross-selling opportunity for both companies. We plan to leverage Gaiam's strong backend functions and sourcing ability to add bottom line profitability to the organization."
In the deal, per filings with the SEC, Gaiam was to receive shares of Spri Products for the shares of its Class A common stock that Gaiam sells to its investors in the merger based on stock swaps.
"We're not a large part of their business," Flentye said, speaking of the revenues.
"The identity of who we are is staying intact," he added. "It's nice to see us grow and develop and start the next chapter."