Anta And XTEP Invest In Overseas Sports, Betting Tens Of Billions Of Outdoor Markets.

In the early morning of winter in Zhejiang, hundreds of cross-country runners were eager to conquer 30 kilometers and climbed nearly two thousand meters. The journalist took part in a cross-country race in December last year and felt the heat of domestic outdoor sports.

The temperature is less than ten degrees, so we only need to compress our underwear, water bag and off-road running shoes, so that the total price of a seemingly simple equipment can easily break through five thousand yuan.

In March 21st, an outdoor sports white-collar worker in Shanghai told reporters that he began to run cross-country race in June last year. By the end of last year, he had completed 8 cross-country race and 2 half marathon race, and spent nearly twenty thousand yuan to buy equipment.

Outdoor sports, including cross-country running, are "burning money". Some netizens have roughly calculated the cost of basic equipment for cross-country running. The most economical and affordable ones are more than two thousand (yuan, the same below), and five thousand of the middle rank.

The basic consumption of the marathon basic equipment is roughly five hundred, two thousand and four thousand respectively.

It seems that the early stage of investment is to ensure safety. Some people have quipped that marathon's tactics are to maintain target speed, while cross-country tactics are "coming back alive".

Rapid growth of China's outdoor market

The sense of smell of capital has always been sensitive, so far, local giants have seen this niche market.

After more than half a year, Anta will finally win the Amer Sports (hereinafter referred to as "amaven"), the total purchase price of 4 billion 600 million euros, the main revenue of amaven is from the very "burn money" outdoor sporting goods, its brand includes Canada luxury family equipment brand Arc'teryx (original bird), French mountain outdoor cross-country brand Salomon (Salomon) and so on.

In March 12th, Anta announced that the consortium made up of Anta sports, Fangyuan capital, Anamered Investments and Tencent has successfully completed the voluntary proposal to make a cash offer for all the issued and issued shares of amamin, and is expected to complete the payment by March 29th.

Coincidentally, another local giant has announced a plan to introduce overseas brands recently. In March 4th, XTEP announced that it had established a joint venture with Wolverine World Wide (WWW US), and plans to design, market and distribute the two brands of "Merrell" and "Saucony" in mainland China and Hong Kong and Macao. The former is the American outdoor brand, the latter is the American running shoes brand, and the two sides will invest 155 million yuan (310 million RMB) respectively.

"We have made relevant estimates, and China's outdoor market is expected to grow to 40 billion -500 billion yuan by 2025. This market has two characteristics, one is high growth, the growth rate is expected to reach double digits in the next few years, two is extreme dispersion, on the one hand, the domestic brand operation is not satisfactory, and foreign brands have not been dominant in the Chinese market, and the market is about 9%-10%."

Chen Ke, senior partner of Roland Begg management consulting company and vice president of Greater China, told the economic report in twenty-first Century in March 13th.

Sports shoes gradually subdivide

Why does Anta want to do this acquisition? According to the announcement issued by Anta, first of all, the diversified brand combination of amamin is in line with Anta's multi brand strategy. Anta believes that some of its brands have great potential in the world and China. Besides, the acquisition will further enhance our group's ability to expand as a world leading sporting goods company in China's domestic and foreign markets.

"After China's per capita income rises, the characteristics of sporting goods consumption are characterized by the breakdown of demand. In short, people may have only a pair of sneakers, playing ball games, going to work and traveling. These demands are becoming increasingly fragmented, requiring different functional sports shoes to meet different scenes, and even sports shoes that meet the needs of fashion.

Chen Ke said.

As a local sporting goods giant, Anta and XTEP both have the need to further expand the brand and category layout.

"The competition among local brands is becoming increasingly fierce, and the sinking of international brands will also cause them to squeeze. Then, through the agency and even the acquisition of overseas brands, the middle and high-end market will be covered. Another dimension is the supplement of subdivision. The local brands are more running shoes and basketball shoes, and it is difficult for them to become professional brands in the minds of consumers."

Chen Ke said.

Anta has tasted the sweetness of multi brand strategy.

Anta's 2018 performance report, released in February 26th, showed an annual revenue of 24 billion 100 million yuan, an increase of 44.4% over the same period last year, and net profit of 4 billion 100 million yuan, an increase of 32.9% over the same period last year.

Italy sports brand FILA, which was acquired by Anta in 2009, has become the most important growth point of the group. In 2018, the sales volume of other brand products represented by FILA reached an increase of 85%-90%.

In the earnings report, Anta has defined FILA as the second main brand of the group.

In addition to FILA, Anta also owns Chinese sports products such as Sprandi, Japan DESENTE, Korea KOLON and other sporting goods business in China.

Let's take a look at amamfin, which owns cross-country running shoes, alpine skiing equipment, ultra high end outdoor clothing, cross-country skiing equipment, tennis, skiing, sports watches and commercial fitness machinery and other categories.

From the point of view of specific revenue composition, outdoor sports product revenue has always been a big head, maintaining around 60%.

"Sports and leisure oriented sports apparel market growth in the past few years has gradually slowed down to an annual growth rate of less than 5%, but professional sports apparel (including shoes) segmentation market in recent years, the growth rate of more than 20%, in the future will probably accelerate growth."

Bain, global partner of the company and chairman of Greater China and merger and acquisition business, Zhou Hao told the twenty-first Century economic report.

How hot is China's national sports? The annual report of the 2018 marathon released by the association of Chinese sports associations in March 11th shows that as of the end of 2018, there were 1581 large scale events in marathon and related sports held in China, and 5 million 830 thousand of the total number of participants. 285 different prefecture level cities in the country held different forms of marathon.

In 2018, the annual total consumption of China's marathon reached 17 billion 800 million, and the annual total consumption of events led to 28 billion 800 million. The total industrial output of the year reached 74 billion 600 million, an increase of 7% over the same period last year.

Local network helps expand overseas brands

"For overseas brands, some markets in Europe and the United States are actually doing the stock market, and even some markets are still shrinking, and China is a huge bonus market."

Chen Ke said.

Amapan's revenue in 2018 was 2 billion 678 million euros (about 20 billion yuan). From its revenue market distribution, the main contribution was from Europe and the United States, and the Asia Pacific region was only about 14%.

For these overseas brands, although they have already come to the Chinese market, but because of the lack of localization and lack of "sense of presence", through cooperation with local partners, they can rely on channel networks and marketing to achieve better expansion in the Chinese market.

For example, the Saucony introduced by XTEP, despite the title of "four running shoes", did not perform well after entering the Chinese market in 2015. It was once more speculated that Saucony would take another big running shoe brand Brooks and quit the domestic market.

In 2018, XTEP's performance report showed that in 2018, 42 marathons and running events were sponsored and became the most popular local sports brand sponsoring marathons. At present, XTEP has a market share of 10%-20% in the field of running shoes.

At the performance meeting held in March 12th, XTEP Group executives said that this year the joint venture will form a team to carry out product research and development and channel construction. XTEP can play the local resources advantage, on the one hand, it is an e-commerce channel. In addition, it plans to open the flagship store in the second tier cities and Hong Kong and Macao regions in the mainland next year. In the next three years, each brand will open 30-50 new stores to form a scale effect.

Anta's global ambitions

Compared with XTEP, Anta has obviously been more ambitious in the next game.

"Anta has developed to the present, although it has been successfully promoted to one of the largest sports Brand Company in the world, but sales mainly come from the Chinese market, and it is still a local Chinese enterprise. Then, it is thinking about how to achieve globalization. Through the acquisition of AMF, Anta will help Anta achieve global layout. I think this is a bigger demand for Anta's paction."

Chen Ke said.

When trading first surfaced in September last year, investors questioned the stock price. On the one hand, it was potential financial pressure. At that time, Anta said that hand in hand source capital made a purchase intention for amamin, while the latter trading structure was adjusted to Anta sports holding 58%, Fangyuan capital and Anamered Investments (Lululemon founder Chip Wilson owned) accounted for 21% respectively, and Tencent participated in Fang Yuan capital.

On the other hand, it is doubtful whether Anta can control the risk of globalization.

"On the one hand, the market is worried that such a big deal will affect Anta's short-term financial performance. Besides, Anta has not or has not proven its global operation and management experience.

Therefore, the late adjustment of the trading structure, inviting Chip Wilson or Tencent can improve the success rate of the paction.

Chen Ke said.

Chen Ke believes that the current stage of overseas mergers and acquisitions of Chinese enterprises is generally started from financial, strategic and weak operation control.

For Anta, what can be done is to make the international market of amamin good, and on the other hand, to capture the huge dividends in the Chinese market. This is a more imaginative market.

Galaxy International Securities previously released analysis said that the above paction structure is better than expected, and Anta and joint venture company's financing costs are quite low.

However, due to the huge amount of foreign exchange involved, Anta's financial position will still face rising financing costs, rising debt ratio and increased profit volatility.

In addition, in view of the fact that amamfin will continue to operate independently, it is estimated that the core earnings of amamin will not change significantly in the short term after the completion of the acquisition.

Anta management expects that the paction will have synergistic effects, such as better terms with suppliers and distributors, but it is expected that these agreements will not be achieved in the short term.

We also believe that Anta needs time to help amamfin speed up its development in China.

"For cross-border M & A pactions, what is the value added point that needs to be clarifying in the early stage is whether to increase revenue or synergy effect.

For Anta, in the face of the huge market demand potential, bringing the product into a nearly new market, I think the greater significance of this paction is that it can enhance revenue. "

An Yonghua, partner of financial pactions consulting in Central District, Yuan Guitai, told reporters on twenty-first Century economic report March 14th.

In fact, XTEP has also shown similar ambitions. XTEP chairman Ding Shuibo recently said that XTEP is searching for overseas acquisitions, seeking to expand business from running shoes to other niche areas in the sports industry, targeting potential fields such as outdoor sports, water and ice sports.

According to media reports, Ding Shizhong, chairman and chief executive of Anta sports, said in his letter: "I have been wondering what this thing means to the company. Recently, many people have asked me that Anta group is developing very healthfully, and the days can be very comfortable. What is it going to do?"

Haruki Murakami, who was obsessed with horse racing, decided to start Triathlon to find more fun when he was almost 60 when he finished his first 100 kilometre marathon.

The spirit of sports may be constantly challenging ourselves and surpassing ourselves.