Xtep International Holdings, the Chinese sportswear group that announced in March a joint venture with Wolverine Worldwide for the sale of Merrell hiking gear and Saucony running shoes in mainland China, has agreed to buy a 100 percent stake in E-Land Footwear USA, the owner of K-Swiss, Palladium, Supra, PLDM and KR3W.
The acquisition, which is worth $260 million in cash, is expected to be completed by the end of July. Xtep wants to strengthen its position in the expanding Chinese sports market but will also make use of growth opportunities in several other overseas markets, particularly in Southeast Asia.
K-Swiss, together with Palladium and Supra, will by supported by Xtep's extensive distribution network. Synergies in research, development and the supply chain are also expected to be created by the takeover.
Xtep, which is based in Fujian, is an athletic footwear company specializing in running shoes that was founded in 2002 and has been listed on the Hong Kong Stock Exchange since 2008. The company's distribution network includes 6,230 stores in 31 Chinese provinces. It reported sales of 6.38 billion yuan renminbi (€824.3m-$927.2m) and operating profit of RMB 1.04 billion (€134.4m-$151.1m) in 2018.
After recording losses in 2013 and again in 2015, K-Swiss reportedly achieved a turnaround in 2018 under E-Land's ownership and under the management of Barney Waters, with sales growing by 12 percent to $109 million. The more casual-oriented Palladium brand of footwear, grew by 10 percent, reaching a level of $78 million in the past year.
In announcing the takeover K-Swiss, Xtep indicated that it regarded the move as an attractive opportunity to invest in globally renowned sports and lifestyle brands targeting the higher segment of the market.
K-Swiss is an American heritage tennis footwear brand, founded by two Swiss skiers in California in 1966, that has gone through various changes of ownership while searching for a new identity. Steven Nichols, a former executive of Stride Rite, bought it in 1986 and developed it strongly as a brand of classic tennis shoes with a lifestyle “clubhouse” flair. Under his ownership, K-Swiss' sales increased, passing the $500 million mark in 2005. A few years later, the brand diversified into running shoes, an area in which Xtep has a certain expertise.
E-Land, a big South Korean conglomerate, acquired K-Swiss in 2013 for the equivalent of around $170 million, bringing it under the ownership of a U.S. subsidiary, E-Land Footwear USA. Two years later, it also bought One Distribution, the owner of Supra and KR3W Denim.
E-Land, which specializes in fashion and the retailing of various types of consumer goods, has been a candidate to the acquisition of the Lafuma Group and Stride Rite Corp. in recent years. Among other operations, it is the licensee of Berghaus, Ellesse and New Balance in South Korea.