Kathmandu welcomes Rip Curl

Kathmandu said the addition of surfwear brand Rip Curl would help diversify its geographic operations.

Kathmandu unveiled a deal earlier this month to pay $350m for the surf brand

Kathmandu shareholders were told on Friday the addition of surfwear brand Rip Curl to the company would help diversify its geographic operations, with the surf business bringing a committed consumer base.

Chairman David Kirk, a former Fairfax chief executive and New Zealand All Black rugby player, said the acquisition would complement Kathmandu’s existing retail businesses.

“Similar to Kathmandu’s core outdoor products category, the surf products market has a stable, committed core consumer, with steady growth in participation and spending,” Mr Kirk said.

“Rip Curl’s brand strength and focus on core technical surf products in key growth cate­gories positions it well within this market.’’

Kathmandu, best known for its outdoor adventure and equipment retail chains, unveiled a deal earlier this month to pay $350m for the surfing brand.

The deal will see Kathmandu buy 100 per cent of the privately owned Rip Curl at a price that implies 7.3 times enterprise value to financial 2019 pro-forma earnings before interest, tax, ­depreciation and amortisation.

Under the new Kathmandu Group, each brand will retain ­operational ownership of its ­respective businesses.

Kathmandu has had recent success with acquisitions. It bought hiking-boot brand Oboz last year for $US75m ($110m) and the business helped propel earnings in financial 2019.

“The acquisition of Rip Curl is an opportunity for Kath­mandu to considerably diversify its geographic footprint, channels to market and seasonality profile, and creates a $NZ1bn ($900m) outdoor and action sports company anchored by two iconic Australasian brands,’’ Mr Kirk said.

“There is strong cultural alignment between the two brands and a shared focus on technical and functional ­products.”

Mr Kirk said the acquisition was expected to deliver meaningful earnings per share ­accretion for Kathmandu shareholders, with 2020 pro forma EPS accretion in excess of 10 per cent (pre-synergies).

There is potential for further upside over time as synergies are identified after the acquisition.

The Rip Curl purchase will create a combined group with 341 owned retail stores (Kathmandu has about 170 stores), 254 licensed stores and more than 7300 wholesale relationships.

Shareholder votes lodged ­before the meeting on Friday showed overwhelming support for the acquisition, with 163.1 million shares voting in favour and 87,489 against.

The acquisition was later supported by more than 99 per cent of shareholder votes.

Rip Curl, which is headquartered in Torquay, celebrates its 50th anniversary this year.