Anta Ding Shizhong Talks About Cross-Border Mergers And Acquisitions: To Make Nike Not Sleep Well

New acquisition is difficult to measure with money.

In February 26th, Anta submitted its 2018 performance answer, which is the best achievement in the past 11 years.

According to the financial report, Anta's revenue in 2018 exceeded 20 billion yuan for the first time, reaching 24 billion 100 million yuan, an increase of 44.4% over the same period last year.

This growth rate is the best result since Anta went public. In the past 10 years, Anta's revenue growth is mostly around 20%.

In terms of earning power, Anta operating profit of 5 billion 700 million yuan last year, an increase of 42.9% over the same period last year.

Gross profit margin increased 3.2 percentage points to 52.6%.

For the substantial growth in performance, Anta CFO Lai Shixian explained that Anta's main brand grew steadily, and the other two brands, including FILA, grew faster.

It is understood that the growth rate of Anta brand in 2018 was double digits, and the growth rate of FILA was over 80%. Desanto's growth rate was 200% due to its low base.

The gross profit margin of Anta's main brand is relatively stable, and the increase in gross margin is mainly driven by FILA and Desanto.

Advantages and disadvantages, the two brands eventually led to 2018 Anta stock turnover increased by 6 days to 81 days.

In 2018, the total number of Anta stores was 1.2, accounting for 10057 of the main brands of Anta, followed by FILA, 1652 in Greater China and Singapore, 117 in Desanto, Sprandi and 117 in Xiao Xiao, respectively.

For the next expansion of the store, Anta chairman and CEO Ding Shizhong said that the number of stores is not the pursuit of Anta, the quality is just the number of friends and stores, Anta is almost the same, but the benefit is less than half of Anta.

The most important concern at the conference was that in December last year, the Chinese consortium headed by Anta spent 36 billion yuan on the acquisition of Amer Sports, Finland sporting goods group, which owns dozens of high-end sports brands including the original bird.

Anta declined to answer specific details of the acquisition, but stressed that it would be announced after the completion of the acquisition.

At present, Anta's acquisition of Amer Sports is in an orderly way, and has been approved by the competent authorities of Mexico, Australia, Turkey, China and the European Union.

Zheng Jie, President of Anta, said there were 90% shareholders' approval and the rest of the deal was cash and so on. It is expected that the takeover will be completed by the end of March.

It is questioned that Anta's purchase price for Amer Sports is too high to be suspected of "snake swallow elephants", but Ding Shizhong does not think so.

He believes that the value of Amer Sports's brand is hard to measure with money, and its brand is not built in the short term by money.

"We bought Amer Sports mainly to see the growth of the Chinese market. The brand of the company is very professional in all fields, and its sales in China are very small."

Ding Shizhong said.

Over the past ten years, frequent acquisitions have blurred Anta's borders and it is unclear what kind of company Anta is.

Ding Shizhong said Anta's strategy is very clear: "single focus, multi brand, all channels", the goal is to create multi brand sporting goods group.

Zheng Jie said that regardless of the number of brands purchased, the positioning of Anta's main brand will not change, which is the root of Anta group.

The biggest role of the past acquisition is to make Anta go further on the multi brand road. If it does not buy FILA, Anta will be very difficult to make the decision to buy Amer Sports.

In the short term, Anta does not expect Amer Sports to contribute to its profits.

Ding Shizhong said that Anta's internal judgment that the paction will not bring about big changes in profits in the near future.

For the next acquisition plan, Ding Shizhong told the "financial world" Weekly: "in the short term, focus on the existing acquisition brands, do them well."

The gap with the giant is still large.

From the perspective of cash flow, Anta's acquisition of Amer Sports exceeded its capability.

According to Anta's shareholding ratio of 57.95%, Anta should prepare at least 20 billion 800 million yuan.

But as of December 31, 2018, Anta group had only 9 billion 200 million yuan in cash and cash equivalents.

Zhang Qingcheng, the founder of sports consultancy, said: "the capital control and the management radius of this acquisition have broken the boundaries of Anta."

The outcome of "snake swallow elephants" is often sad and demanding. The most typical is Lenovo. The bitter pill of buying big shots is to sell assets.

Ding Shizhong responded that Anta was not an adventurous company, but a conservative company.

It has taken into account the financial problems and found several consortia.

In order to solve the funding gap, Anta also intends to borrow money from banks.

In November 2018, Bloomberg said Anta and Fangyuan capital were prepared to borrow 4 billion 215 million euros.

Among them, Asian institutions provide 2 billion 200 million euro five year loans, European institutions offer 1 billion 700 million euro seven year B regular loans, and 315 million euro revolving credit lines related to B class term loans.

It is conceivable that once the acquisition is completed, Anta will be in debt, and its cash flow and short-term profits will also be affected.

In addition, how to avoid the competition between brands is a challenge that Anta must face.

Ding Shizhong is not worried about this.

He said Anta's multi brand differentiation is obvious at the moment.

Of course, if Anta can operate well the Amer Sports, it may achieve the target of 100 billion revenue at an early date. Anta will also have the courage to challenge Nike and Adidas two giants.

As early as 2012 when Anta became the leader of local sporting goods, Ding Shizhong aimed at Nike and Adidas.

On the bookcase of his office, the art of war is shoulder to shoulder with the shoe dog of Nike founder Phil Nate (Phil Knight).

He also told the media: "before they (Nike and ADI) let us sleep, now we have to let them sleep."

Although from the financial data, the gap between Anta and the big two is shrinking, but it is still very large.

From the market value perspective, in July 2017, Anta's market value exceeded 74 billion Hong Kong dollars and became the fourth largest sporting goods company in the world. In January 2018, Anta's market value broke through 100 billion to 100 billion 537 million Hong Kong dollars, which was second only to Nike and Adidas.

In February 26th, Anta's share price rose 0.11%, and its total market value was HK $118 billion 100 million (about US $15 billion), while Nike's market value was $134 billion, which was 8.9 times that of Anta.

At the level of revenue, the calculation of "financial world" magazine found that in 2015, Nike and Adidas's revenues were nearly 18 times and 11 times that of Anta.

In 2017, the two data reduced to 13.9 times and 9.9 times.

The gap is still obvious.

More embarrassing is that in the Lining era, the dominant position of China's sports user market is local brands.

In the Anta era, the vast majority of the market was in the hands of foreign brands.

Tianfeng securities data show that in 2011, local brands accounted for 49.1% of the shares, far exceeding the 28.3% share of foreign brands. However, by 2018, local brands only had 28.6% share, and foreign brands soared up to 54.3%.

In 2017, Nike and Adidas accounted for 16.8% and 19.8% respectively in the domestic sporting goods market, ranking second and No. 1, Anta ranked third, accounting for 8%, and FILA accounted for 2.6%, ranking ninth.

As the leader of the local sporting goods industry, Anta has a long way to go.

Brand value, according to "2017 of the world's most valuable 50 fashion brands," Anta is the second highest growth brand, brand value increased 67% to 2 billion U.S. dollars, ranking from forty-sixth in 2016 to thirty-fifth.

On the same list in 2018, Anta was the twenty-eighth place.

The first seat on the list is Nike.

Adidas took a year to complete the climb from fifth to fourth.

The difference between brand competition is bigger. The two main brands of Nike and Adidas are powerful, and they invest heavily in design and technological innovation. Anta's main brand's user cognition still stays at parity and practicality.

To some extent, the brand power of Anta's main brand is also weaker than that of Lining.

In recent years, Lining has attacked the design with the help of the tidal wave of the east wind and reached the New York international fashion week.

The main brand of Anta has only promoted the "brand remolding" since the second half of 2018. It wants to be closer to the first and second line young people, but it has made slow progress and has not achieved any results yet.

"This is the decision of DNA of an enterprise.

Anta is a business oriented enterprise. To see where the biggest market is and how to get into the market more easily, it is easier to generate paction realisation and layout from a group perspective.

From the perspective of single brand, Lining has made a lot of efforts in shaping soft power.

Zhang Qingru is the judge.

More than ten years of hunting history

The history of Anta's international brand hunt dates back to 10 years ago.

In 2009, Anta won the trademark rights and franchises of the Italy sports brand FILA in Greater China with HK $600 million.

That is the golden age of China's sporting goods industry. The enthusiasm of the Beijing Olympic Games is still in the frenzy. The brand of sporting goods that has made a lot of money is eyeing the road of acquisition and merger.

That year, the pattern of China's sporting goods market has not been rewritten. The throne of the market leader is still in the hands of Lining.

On the way to buy, Lining also ate crabs earlier than Anta.

At the end of 2008, Lining spent 934 million yuan to take over 20 years' brand manufacturing and agency rights in Italy.

As early as three years ago, it had earned the revenue from the Chinese operation of the French outdoor brand AI Gao.

The trend of China born out of Lining is an earlier step. In early 2006, when Chen Yihong bought the trend of Beijing from Li Ning Co, he went to Italy to discuss Kappa's merger and acquisition. Shortly afterwards, he announced that he would buy Kappa's brand ownership and permanent management rights in mainland China and Macao at a cost of 35 million dollars.

In April 2008, shortly after the listing, China succeeded in winning Kappa's ownership and management rights in Japan.

In the short span of two or three years, China's sporting goods industry has entered the golden age of life and death.

Around 2012, no one survived the industrial inventory crisis.

The performance of several listed companies such as Anta and Lining has generally declined, and they are in trouble.

The industry pattern has been rewritten. In this crisis, the acquisition of sports goods companies has to be suspended.

In 2013, 31st degree made a tentative step to set up a joint venture with the Nordic outdoor brand One Way Sport.

After landing on the A share capital market in 2014, the expensive birds opened the prelude to "buy and buy".

According to incomplete statistics, the investment amount of the bird is nearly 5 billion yuan, covering the areas of sporting goods, electricity, retail, insurance, games and so on.

The price is that the birds have pledged 99% of the shares.

Anta did not restart its acquisition until the crisis was lifted in 2015.

Zheng Jie told the financial world weekly that Anta's multi brand strategy started in 2009, but the real opening was 2015. The acquisition of FILA has achieved initial success this year.

At the end of 2015, Anta spent tens of millions of dollars to acquire the low and medium end Sprandi in the UK, and spent 150 million yuan in 3 months to establish the Chinese Desanto with the Japanese high-end ski brand Descente.

The following year, Ding Shizhong wrote the strategy of "multi brand" into Anta's earnings report, and called out a small target to achieve 100 billion revenue in 2025.

Since then, Anta's hunting action has obviously accelerated, and it will bite hard to see the moving target.

In February 2017, Anta's subsidiary subsidiary ANKO and Korea's well-known outdoor brand Kolon Sport set up a joint venture, but did not disclose the amount of funds. After 7 months, they purchased HK high-end children's clothing brand Xiao Xiao cattle with HK $60 million in Hongkong.

The German brand Puma also appeared on Anta's hunting list.

People familiar with the matter said: "by the end of 2016, Anta and Puma had been in deep contact.

But the other side did not have the power to sell at a low price. The two sides did not talk about the price.

Finally, Anta and so on come to Amer Sports.

For the acquisition of multiple targets, Anta adopts the strategy of focusing.

Zhang Qing and Ding Shizhong intersect for many years, he told the "financial world" Weekly: "Ding Shizhong is not very interested in the operation of pure capital.

I once suggested that Anta invest in upstream and downstream businesses, and he shook his head after listening.

Lining, who first set foot on the road, became cautious after his own reasons.

In the past three years, it has attacked only one target, that is, in collaboration with ACON's company, the exclusive operation of the US women's life sports brand Danskin in mainland China and Macao.

Lining said at the earnings conference last year, "we still focus on Lining."

On the road of acquisition, PEAK and XTEP are much slower.

It was not until 2018 that PEAK took the first step to fully acquire the Swiss outdoor and ice and snow equipment brand OZARK.

XTEP has been calling for 10 years' acquisition of overseas brands, which is still at the slogan level.

Medium and high end short board

The brand that Anta acquired has its own characteristics, positioned in the middle and high end, which indicates that the purpose of the acquisition is to supplement the high-end short board.

Ding Shizhong said, Anta store expansion, the main brand Anta mainly three or four line city, FILA for one, second line, Desanto is against super line.

In a word, the difference between Anta and the acquisition of brand is pointed out.

Anta's base camp in the three or four tier cities, customer groups are "poor Cock wire", want to enter the first and second tier cities, it is very difficult to win the high-end users.

This is the only way for a brand to develop in the long run.

Lining tried to break through to the first and second tier cities and capture high-end consumers, but a series of moves to change logo, change slogans and raise prices eventually failed.

Lining's foundation was also shaken. After reaching its peak in 2010, he quickly turned and lost the throne.

In the face of the sinking of Nike and Adidas, and the crisis of international agency business being recovered, in 2008, Ding Shizhong felt bitter and determined to buy and seize the initiative.

In the same year, Anta sold its international brand agency business and took the FILA the following year.

Even though FILA was in deep mire at the time, and the external voices of doubt continued, Anta decided to make acquisitions.

When Zhang Tao, vice president of Anta, mentioned the acquisition, he said: "FILA mainly takes the high-end sports route, facing the market segments such as tennis and skiing. It has an advantage in the international brand effect and technology research and development, and the acquisition is conducive to Anta to seize the high-end sports market share."

In the first few years, the success of China's acquisition of kappa allowed Anta to buy more.

After the acquisition of kappa, China not only successfully landed in the capital market, but also increased its profit from 330 million yuan to 1 billion 310 million yuan in two years.

From the perspective of consumer groups, there is more and more middle class in China, and the wave of consumption upgrading is more and more fierce. The upgrading of brands must also be on the agenda.

Besides, the top players in the high-end market have already tasted the sweetness ahead of time.

From 2016 to 2018, the revenue of Nike Greater China increased by 27%, 17% and 18%, respectively. In 2018, it exceeded 5 billion dollars in revenue.

Adidas announced in its third quarter 2018 earnings report that the Greater China region has been growing by more than 20% in 11 consecutive quarters.

The rising stars such as Puma, new Bai Lun and Asics also gained a lot. In the 2017 fiscal year, the sales volume of Asics in China increased by 34.5%.

Anta wants to rob the market with the giants, and can only buy its own short board in the middle and high-end market. Starting from the market segmentation, it will eventually win the Amer Sports, the entry-level outdoor brand Spandi, the high-end Japanese brand Descente focusing on skiing and high-end training, the Korean high-end brand Kolon Sport, and Hongkong's high-end children's wear brand Xiao Xiao cattle.

Ding Shizhong's ultimate goal is to become the world's Anta.

He said that past experience shows that Anta has the ability to mold new brands, and hopes to bring Anta's main brand to the world through managing multiple brands worldwide.

According to Bloomberg news, Anta's international goal is to increase revenue from overseas market to 40% in the next 10 years.

But at present, Anta's international foundation is still very weak. There are only a small number of distribution businesses in Southeast Asia, Eastern Europe and the Middle East market.

Digestion after mergers and acquisitions

M & A is not an easy way to go. It is often full of thorns. Bad digestion will drag down the brand.

Since 2011, kappa, who once had no two of the scenery, has bid farewell to the peak and continues to fall.

It is too much in pursuit of fashion and professionalism. It has forgotten what the general public needs eventually and ends up in a state of warmth.

The performance of One Way is not outstanding.

The results of the first half of 2018 show that in the five years since the merger and acquisition, only 47 of China's ONE WAY's self operated stores have been established.

Lining, a pioneer of international brands, lost 56 million 935 thousand yuan in 2009 and 91 million 749 thousand yuan in 2010.

Subsequently, because of poor performance, Lining no longer disclosed the data of Lotto separately.

According to the 2017 earnings report, Lining's main brand revenue was 8 billion 819 million yuan, accounting for 99%.

This means that Lining's brand, such as Lotto, Ai Gao and Kaisheng (for China's badminton brand), can be ignored, with only 55 million yuan.

As for the four sides of the crazy expansion of the noble bird, has already tasted the "unfocused" bitter fruit.

By the end of September 2018, the business income of the noble bird was 2 billion 302 million yuan, down 0.52% compared to the same period last year. Net profit was 16 million 59 thousand and 100 yuan, down 89.14% compared with the same period last year.

Under the predicament, the noble bird embarked on the same way of selling assets as HNA and Wanda.

Anta's intensive acquisition now sees only FILA in its effectiveness. The other four international brands do not have a high profile in external propaganda, and Anta executives do not want to mention their contribution to performance.

In the earnings conference, Zheng Jie said that the biggest contribution to Anta's performance in 2018 was Anta's main brand, and the acquisition brand's contribution to the group's performance was still very small.

"For several brands that are newly purchased, Anta will interview the product and channel layer in the early stage. Once it is successful, it will start to work hard at the brand level."

Zhang Qing said, "in addition to FILA, Anta kids is doing well now, and other brands are still groping."

Sometimes, the pace of exploration will be distorted.

Yan Yan, a former Desanto employee in China, believes that the Chinese Desanto team has been overusing the FILA model.

"High-end, professional" is the brand positioning of China's Desanto, but the current strategy is not consistent with professional.

In the autumn of 2018, Yan Yan had planned to organize the triathlon China tour, which was the direction of the high-end crowd. But eventually it didn't work. The company spent all its money elsewhere.

"Other places" means that Hongkong's star Daniel Wu is invited to be the spokesman of Desanto's Chinese brand.

This model is copied by FILA.

Yan Yan also proposed the establishment of a professional product development team to open up Anta's Chinese athletes resources, develop professional sports products with Chinese characteristics, but ultimately failed to implement.

Even after FILA was digested by Anta for five years, there was a turning point.

In 2014, it turned into a deficit, and at the end of 2018, it sold more than ten billion dollars. It became the first sub brand of Anta's first entry into the 10 billion club.

However, Anta is not willing to disclose the proportion of FILA in revenue.

In the process of bringing FILA back to life, Anta kept its independent development and dug up Yao Weixiong, who served in many international brands as president of Greater China.

After taking office, Yao Weixiong made bold reforms, launched a new team, injected new genes into FILA, established "fashion + sports" as the core temperament of FILA, and avoided confrontation with Nike and Adidas in the field of professional sports.

Although Anta is satisfied with the development of the acquisition brand, the question is whether Anta can rebuild a FILA next, and most of the brands bought by Anta are still at a loss.