300 Billion Won! Tebu International Wants To "Win" The American Tennis Shoe Brand Geshiwei

According to foreign media, Tebu International Holdings Co., Ltd. (hereinafter referred to as "Tebu International"), a local fashion sporting goods enterprise, is acquiring the brand Gesewe under Korean Elion. E-Land will sell K-Swiss, its shoes production company in California, USA, to Tebu International Holdings Co., Ltd. (1368. HK). The transaction scale is about 300 billion won (about 268.1 million US dollars). Tebu International has decided to acquire "Gesway" to improve its competitiveness in overseas markets.

According to the source, E-Land will sell K-Swiss, its shoes production company in California, USA, to Tebu International, with a transaction size of about 300 billion won (about 268.1 million US dollars). Tebu International has decided to acquire "Gesway" to enhance its competitiveness in overseas markets.

The network reporter learned from the information that Gesway is a listed company located in Vannes, California, which has been established for more than 40 years. The company launched the first full leather tennis shoe K-Swiss "Classic" in 1966. Since its inception, K-Swiss has been rooted in California Sport, aiming to become the most exciting and innovative sports brand in the market. Today, through the combination of California Sports composed of TennisHeritage, California Fit (running, triathlon and fitness) and California Youth, the company provides several categories of high-performance and fashionable shoes and clothing.

K-Swiss products mainly include various types, most of which are available in men's and women's styles, as well as a series of fashionable clothes and accessories, such as leisure bags and socks. Its elegant and generous image is easy to cater to the clothing accessories, which not only deeply attracts the noble and elegant fashion family. It is more suitable for the actual needs of outdoor activities. As for the selection of materials, design and functions of K-Swiss shoes, they are also a model of meticulous, elegant and comfortable performance. The leisure sports shoes of the classic series still retain the original spirit - the elegant appearance and high-quality connotation are impressive.

The network reporter has learned that on March 29, Special Step International announced that it would issue 247 million new shares at a price of HK $5.56 per share, a 15.0% discount to the closing price of the previous trading day and 11.3% discount to the average closing price of the previous 10 consecutive trading days. The newly issued shares are equivalent to 9.92% of the total capital stock after expansion. The net income of approximately HK $1.355 billion will be used for a potential acquisition.

 It is understood that the sporting goods brand to be acquired by Tebu International is an international sporting goods company headquartered in the United States, which provides yoga, gym fitness, badminton and other related sporting goods for the high-end market, which will complement Tebu's current brand portfolio and product portfolio. The total cost of this potential acquisition is estimated to be about US $240-260 million (equivalent to about HK $1880-2040 million).

Investors are generally puzzled. At present, Tebu International is in a net cash state. The company is not in urgent need of cash either in its existing business or in its recent cooperation with WolverineWorldWide to introduce the brands of Saint Connie and Milo in Greater China. In the teleconference held by Tebu International on the additional issue, the management explained that its purpose was to raise funds for an overseas acquisition. Although Tebu International has abundant cash, the cash is mainly onshore RMB. Due to the strict regulation of the State Administration of Foreign Exchange, it may be difficult to remit cash overseas at present. Tebu International also doesn't want to use loans to fund acquisitions, because there are two reasons that make this risky: (1) huge financing costs bring pressure; (2) Exchange risk. The recent performance of Tebu's share price is strong, and the management believes that it is a good time to issue additional shares to make full preparations for the acquisition.

According to the management of Tebu International, Tebu International has been negotiating with a number of overseas brands to acquire. The American international brand to be acquired above will complement the existing brand portfolio of Tebu (main brand of Tebu, San Kangni and Maile), and it is expected that the target customers are consumers in China's first and second tier cities. However, too much detail has not been provided at this stage. Special Step will decide the next action according to the transaction progress. Therefore, analysts believe that this may bring uncertainty to the profitability in the short term.

In addition, according to the management of Tebu International, the first store of Saint Connie and Mile will be opened before the beginning of 2020, and the company's goal is to open 30-50 new stores for each brand in 2020. Before that, Tebu International will first sell the products of Saint Connie and Milo brands through e-commerce channels.

According to public data, Tebu International is one of the leading large-scale sports fashion and sporting goods enterprises in China, mainly designing, developing, manufacturing and selling sports goods mainly including shoes, clothing and accessories. Tebu International, headquartered in Quanzhou, Fujian Province, started out by providing OEM services. It has produced sneakers for many international famous brands.

The financial report shows that in 2018, the operating revenue of Tebu International increased by 24.8% year on year to 6.4 billion yuan, which is higher than expected, mainly due to the increase of the sales out rate of more than 75% after the success of the company's strategic transformation, the increase of dealers' replenishment orders and the high growth of retail store sales after the upgrading of stores and channel optimization, of which the revenue of shoes and clothing increased by 20.5% and 32.3% year on year, respectively, accounting for 61.5% 36.4%。

The gross profit margin increased by 0.4PCT to 44.3% year on year, mainly due to the increase in the proportion of revenue from functional products with high unit price, and the strengthening of cost control in the supply chain by Tebu International, where the gross profit margin of shoes and clothing increased by 0.6PCT, 0.4PCT to 45.6% and 42.6% respectively. The net profit attributable to the parent company increased by 60.9% year on year to 657 million yuan, which was higher than expected, mainly because of the large increase in financial income, government subsidies, wealth management interest income and other income, and the general and administrative expenses decreased due to the superposition of the company's offset of the provision for impairment of accounts receivable, and the net profit growth was higher than the income.

Li Jie, an analyst with Everbright Securities, said that with Tebu International's cooperation with international brands to expand the domestic market, the multi brand strategy has been implemented. In March this year, Tebu International announced the establishment of a joint venture with Wolverine Group to expand the two major brands of Saucony and Merrell in mainland China, Hong Kong and Macao. In fiscal 2018, the global business of the two brands respectively achieved a decline in the number of units and a moderate increase in the number of units. Saucony and Merrell will enrich the company's current product matrix, supplement high-end professional running shoes and outdoor climbing products, and strengthen the company's professional sports brand image.

In terms of business collaboration, the above two brands will expand the industrial resources of Tebu International in the channel end and supply chain end, accumulate international multi brand operation experience, and cultivate and strengthen their own team strength; Tebu can provide leading channels, marketing and supply chain resources in the local market, expand stores to sell high-end classic series and customized product styles for the Chinese market through joint ventures. Li Jie predicted that the joint venture would reach the balance of income and expenditure in about three years, thus generating profit contribution.