Yakima merges with Kemflo International - SNEWS

Yakima merges with Kemflo International

Yakima ends 9 years of ownership by Arcapita and merges with Kemflo International of Taiwan. SNEWS has the inside look at the deal as well as comments from Yakima CEO Jerry Heinlen.

Yakima, owned by private equity firm Arcapita since 2001, now has a new partner -- Kemflo International Co. Ltd., a long-term strategic supply chain partner with headquarters in Taiwan and business interests in Europe, Asia and the United States.

Heinlen would not comment to SNEWS® on terms or financial information other than to say Arcapita had been a very supportive owner and gave Yakima “the running room and positioned us for future growth.” As for Kemflo, Jerry Heinlen, CEO of Yakima, told us the company is “a private organization, but it has a strong history of growth and is very much looking forward to partnering with us to grow Yakima into a much larger size.”

Kemflo is no stranger to Yakima, having been a supplier of certain parts the company uses in the production of many products in the Yakima factory in Mexico, as well as being a producer of a limited number of products for Yakima in its own Taiwanese factories. Kemflo is also very well-connected in Asia, Europe and the United States – although most would not recognize the brand or its products as its business in the United States is strictly OEM and it protects its information very closely.

It is the Asian and European connections that Yakima is looking to leverage and help it more rapidly execute on an international distribution program it has already started to undertake, Heinlen said.

“Our international growth has taken some flight in the last 18 months, and we added an international sales director in March 2009, but the process is still very young,” said Heinlen. “Kemflo will give us access to broader resources we look forward to leveraging.”

Heinlen added that he sees continued strong growth opportunities in North America as well. As for any changes as a result of the merger, Heinlen told us there will be none that will be noticed by either Yakima’s business customers or its consumers.

“We will continue to operate as an independent brand with no changes to our operations. The supply chain footprint will remain the same as well,” said Heinlen.

The one thing that will change is that with the new ownership partnership, Yakima expects to be able to leverage design and engineering resources to speed up time-to-market processes. “Our U.S.-led design and development team will gain support in a 24/7 timeframe,” Heinlen told SNEWS. “When we are shutting down in the U.S. at the end of our workday, our team can hand-off a design to another supporting engineering in Taiwan who is just starting his day and he will be able to move it along, improve it, and then hand it back at the end of his day.”

--Michael Hodgson

SNEWS® View: The terms of the merger deal, which was announced Dec. 28, were not made public. Arcapita, formerly First Islamic, at one time owned Yakima as part of a collection of outdoor brands which included the Watermark paddlesports group. In 2005, Watermark was sold to Confluence, and Arcapita retained ownership of Yakima. Arcapita lists the transaction value of Yakima when it was acquired in 2001 at $173.1 million. Insiders told us there is no way that the private equity firm got anywhere near that amount and has been aggressively looking to divest itself of the brand in recent months, take a loss, and move on. Based on numbers SNEWS® has been privy to and tracking since early 2000, and then since the Watermark sale, we would estimate that overall sales for Yakima in 2008 and 2009 were somewhere between $40 million and $50 million. EBITDA was certainly far, far less than that – perhaps $5 million to $10 million. Insiders have also confirmed that prior to Yakima CEO Jerry Heinlen taking over, the company was bleeding red ink. Insiders also told us that Heinlen’s efforts have apparently restored order, as well as operational and production efficiency, but to what extent that has benefited the bottom line is not clear. Indications are that the company has been moving in the right direction financially and operationally in the last year or two. All in all, though, this merger is deemed by insiders with whom SNEWS spoke as a very good thing for Yakima in the long term and, as a result, good for the industry. --SNEWS® Editors


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