Anta’s Acquisition of Amer Sports

Franklin, Rita & Milton

Spring 2020 Investing & Financing in and with China
Anta Overview
● Anta Sports Products Limited (SEHK: 2020)
● Founded in 1994, by Ding Shizhong
● Chinese Manufacturing Company, based in Zhejiang
● Anta Sports was listed on the Hong Kong Stock Exchange in 2007 with its IPO price at HK$5.28 per share
● Anta Group has 12,479 stores, of which 10,223 are Anta branded stores and 1,788 are Fila stores by the end of August
2019

● In 2019, Anta Group, the world's third-largest sportswear company by revenue, saw revenue increase 40 percent to
14.8 billion yuan ($2.07 billion) and profits increase 58 percent to 4.2 billion yuan ($0.58 billion) in the first six months,
according to its half-year financial report.
● Sub-brand Fila's 2019 revenue climbed 79.9 percent to 6.54 billion yuan in the first six months, and gross profit grew
79.2 percent to 4.7 billion yuan or 71.5 percent of the company's total revenue, up 10 percentage points compared to
2018.
Anta’s Brand Portfolio
Vision
To become a respected world-class, multi-brand sportswear group

Multi-brand strategy

Performance sports brand Fashion sports brand Outdoor sports brand

Anta Anta-kids FILA Kingkow Kolon Sport

Aiming to become an international brand with

China’s well-known Aiming to become a
largest market share in China’s outdoor
sportswear brand global children’s
sportswear market
sportswear brand

A famous Mid-to-high-end
international kidswear brand
AntaPlus Sprandi fashion sportswear Descente Amer Sports
brand, with
sub-brand
A fashion A well-known FILA-kids, Globally well-known
sportswear brand comfortable athletic FILA-fusion, and high-end sportswear
launched by Anta footwear brand FILA-athletics and skiing clothing
Group company
Anta’s Strategy
Multi-brand & Omni-Channel & Full Coverage Strategy
Multi-brand Omni-Channel Full Coverage

Street Store Shopping Mall

Department
E-Commerce
Stores

Outlets
Anta Financial Analysis

Key Performance Indicators

● FILA growth has been stellar up

over 70% YoY
● Profit Margin though has been
decreasing
● R&D has been around ~2-3%
● Inventory and AR buildup is
concerning
Competitive Landscape of Chinese Sportswear market

● Top-three industry players in China—Nike,

Adidas and Anta Sports
● Nike and Adidas each holding about a 20% share of the
market in 2017. However, leading domestic player Anta
Sports, with 8% of the market in 2017.
● In 2018. Nike leads in Chinese market share at 22.1%,
followed by Adidas with 18.6% and Anta a distant third at
10.4%.
Why Multi-brand Strategy works
● Anta firstly perceived as a low or mid-quality brand that focus on
three or four-tier cities of city
● But due to the development, Anta need to conform to the trend
that people are getting richer, consuming taste is rising

Problems:

● Difficult and time consuming to build a brand

Solutions:

● Anta is targeting brands in niche categories where incumbents

Nike and Adidas are not as strong
● Multi-brand strategy
● Acquisition
Market shares in the Whole Apparel Market in China
Anta’s Overseas Expansion - Historical Transactions

● Acquisition:

This is not Anta's first encounter with a foreign company. It purchased Italian brand Fila's Chinese
operations in 2009 and helped Japanese sportswear maker Descente roll out in China through a joint venture
with Itochu in 2016.

Anta plans to expand its operations overseas in one fell swoop even at the expense of relying on other
brands, including those gained through Amer.

● Represent:

In 2017, Anta aims to boost its recognition abroad, already having signed a shoe deal with basketball
star Klay Thompson of the NBA's Golden State Warriors. (10-Year, $80M Endorsement Contract)
Transaction Overview
Key Transaction Information
Sept. 2018 Target Amer Sports (NASDAQ OMX: AMEAS)
Amer Sports’ business is balanced through its broad portfolio of sports and products and a presence in all major
markets. The offering of sports equipment, apparel, footwear, and accessories covers a wide range of sports, including
tennis, badminton, golf, American football, soccer, baseball, basketball, alpine skiing, snowboarding, cross-country
skiing, fitness training, cycling, running, hiking, and diving.

Buyer Anta Sports (58%), Anamered Investments, Foutainvest Partners (15.8%), Tencent (5.6%),
Chip Wilson (founder of Lululemon) (20.7%)

Stake 94.98%
acquired
Sector Consumer (Sportswear, Apparel, Footwear)

Size (€mm) 5,581.9 (USD 6468.8 million), €40 per share; 39% premium over announcing day closing
share price

Announced Date 09.11.2018

Closed Date 03.29.2019

Transaction Highlights Stock Price Dynamics

● Largest outbound Chinese transaction into Europe in 2018
Delisting Price: €40.01
● Beijing 2022 Winter Olympic Games (Anta as official Sports
Apparel parter, 2017)
Around 80% 2018 annual increase
● PyeongChang 2018 Olympic Winter Games (Feb. 2018),
South Korea
Outpacing market benchmarks
● Regulatory Approval by China despite clamp-down on large
outbound investments since late 2016
 Amer Brand Portfolio and Positioning
€2,678.2 million Total Revenue (2018)

HQ: Helsinki, Finland

43%
42% 15%

+7%

+7%
0%

Brand Portfolios: A Global Niche Sports Segment Leader Amer Weakness and Strength
● Small in scale, no brand revenue > EUR 1 billion
● All consistent single digit growth in the past decades
● Wholesale focus with low DTC portion
Top 1 Tennis, Top 1 Diving Watch
Top 2 High-end Baseball and
SE Sports Fashion ● US market substantial slowdown, low Asia growth
outdoor apparel American football

● Good brand reputation globally in craftsmanship and

Fitness equipment
quality
Top 2 WSE
*As of TTM Q3, 2018
Amer Financial Analysis
ROCE vs. WACC L5YR
● Stagnated growth across all
major segments (outdoor
apparel is the greatest growth
contributor)

● Limited Margin Improvement

● Widening ROCE - WACC

supports value

● EBITDA Margin (10.8%) lower

than industry average
(outdoor) of 12.7%

Net sales (EUR) by Segments, 2016-2018 Net Sales (EUR) within Outdoor Segment, 2016-2018 ● Group revenue CAGR higher
2.08% than industry (outdoor)
negative growth of -0.4%

-0.35%
1.47%
Amer’s Strategy
Softgoods (Asset-light)
DTC Channel Development More China
Acceleration
+ E-commerce
(Margin Contributor)

● Aim to sustain a 20% CAGR in

China Market

● Focus on Softgoods (Arc’teryx)

● EMEA/NA high competition,

saturated

● China’s growing interests in

Sports and fashion Apparel higher multiples
Median 16.7x EV/EBITDA
winter sports
● Distribution Channel Transformation
(Traditionally over 60% B2B, wholesale)
● 20% organic growth DTC
● 364 own retail and partner stores, and
100 e-commerce stores globally
● Composed of 15% own e-retail growth
Deal Situation Analysis
● Anta’s model is to “provide value-for-money functional products”
○ Competition has intensified leading to decreased operating profit margins
○ Desire to diversify revenue streams from international brands

“We are delighted about the opportunity to invest in Amer Sports, a leading sporting goods company with a strong portfolio of internationally-recognized brands. In
particular, we are excited to bring these premium international brands and products to Chinese consumers, who increasingly seek high-end products with
outstanding qualities and heritage in various niche and specialized sports segments.”

Ding Shizhong

● The management of Amer Sports will stay on after the deal

○ Anta sports will help Amer with R&D and partnerships
○ Amer growth has been flatlining with various acquisitions that have not been accretive
○ Management has been dealing with a business slowdown and underperformed the
stock market
Relative Valuation of Amer — Comparable Companies
Historical Sector Multiples 2018 Q3 LTM Multiples
Outdoor and Leisure Companies EV (USD mm) EV/LTM Revenue EV/LTM EBITDA EBITDA Margin Revenue Growth

Samsonite International S.A. $55,057 2.16x 13.40x 16.10% -2.10%

5-year Median: 11.5x
Shimano Inc. $10,284.00 3.30x 13.10x 25.10% -0.60%

Brunswick Corporation $5,380.00 1.17x 9.00x 13.00% 3.60%

BRP Inc. $4,663.00 1.33x 10.50x 12.70% -0.50%

Thule Group AB (publ) $2,617.00 3.85x 19.60x 19.70% -0.90%

Vista Outdoor Inc. $1,853.00 0.80x 11.70x 6.90% -0.30%

Compass Diversified Holdings LLC $1,634.00 1.29x 9.10x 14.20% 0.10%

Callaway Golf Company $1,794.00 1.57x 12.20x 12.90% -9.30%

Dorel Industries Inc. $1,371.00 0.53x 8.50x 6.30% -0.90%

Sturm, Ruger & Company, Inc. $901.00 1.73x 8.20x 21.10% 3.10%
5-year Median: 16.7x
Accell Group N.V. $810.00 0.63x 13.70x 4.60% 1.60%

American Outdoor Brands Corporation $795.00 1.20x 7.40x 16.20% 2.30%

Johnson Outdoors Inc. $561.00 1.09x 9.10x 12.00% -3.80%

Nautilus, Inc. $407.00 1.00x 7.60x 13.20% 0.20%

Calida Holding AG $295.00 0.77x 10.10x 7.60% -1.70%

Rapala VMC Corporation $249.00 0.81x 11.70x 6.90% 1.10%

Escalade, Incorporated $211.00 1.19x 11.60x 10.30% -1.70%

Bonny Worldwide Limited $47.00 0.89x 7.80x 11.50% -

Given Amer’s 2018 Q3 TTM Revenue of €2,678.2 million and EBITDA of €295.6 Mean 1.43x 10.79x 12.8% -0.6%
million, Amer’s Enterprise Value would be in a range of €3,044.7 million to
€3,829.8million if sector-wide transaction multiples are applied. After adjusting on Median 1.19x 10.30x 12.8% -0.5%
debts and cash, per share equity value would be in a range of €21.7 to €27.7.
High 3.85x 19.60x 25.1% 3.6%

The transaction price of €40 represents around 44%-84% premium above the
Low 0.53x 7.40x 4.6% -9.3%
benchmark.
Relative Valuation of Amer
Precedent Transactions in Outdoor Sportswear, Apparel, Equipment & Footwear Sector
Year Target Target Country Acquiror Acquiror Country Acquired Stake EV (USD mm) EBITDA Margin EV/Sales EV/EBITDA

2018 Peak Performance SE Amer Sports SE 100% $363.44 17.2% 1.8x 23.2x

2018 Oboz Footwear US Kathmandu Holdings NZ 100% $75.00 15.2% 2.5x 16.3x

2018 Marolina Outdoor, Inc. US Goode Partners US Minority $38.00 5.1% 0.4x 7.0x

2017 Reebok-CCM Hockey US Birch Hill Equity US 100% $110.00 - - 11.0x

2017 Rawlings Sporting Goods Company, Inc. US Seidler Equity Partners, Major League Baseball Enterprises US 100% $109.50 5.6% 1.2x 11.5x

2017 YEAH!AG DE A.S. Adventure BE 100% $38.42 9.0% 0.7x 7.2x

2017 Billabong International Limited AS Boardriders, Inc. US 81% $266.90 5.6% 0.4x 7.1x

2017 Ice Breaker New Zealand NZ V.F. Corporation US 100% $288.00 - 1.9x -

2017 Nautic Star US MCBC Holdings, Inc US 100% $79.80 - 1.3x -

2017 Dunlop Sports Co. Ltd. JP Sumitomo Rubber Industries JP 100% $469.20 8.0% 0.6x 7.5x

2017 Newell Brands Inc. US Kohlberg & Company US 100% $240.00 7.3% 0.7x 9.6x

2016 Swims AS NO Differential Brands Group Inc. US 100% $14.43 7.0% 1.3x 20.1x

2016 EvoShield US Wilson Sporting Goods Co. US 100% $11.70 - 1.1x -

2016 Champion Europe S.p.A. IT Hanesbrands Inc. US 100% $222.10 - - 10.0x

2016 5.11, Inc. US Compass Diversified Holdings US 100% $400.00 13.1% 1.4x 10.5x

2015 POC Sweden AB SE Dainese SpA IT 100% $66.60 9.0% 2.9x 32.5x

Mean 9.3% 1.2x 13.3x

Given Amer’s 2018 Q3 TTM Revenue of €2,678.2 million and EBITDA of €295.6 million, Amer’s Enterprise
Value would be in a range of €3,103.8 million to €3,945.4 million if sector-wide transaction multiples are Median 8.0% 1.3x 10.5x

applied. After adjusting on debts and cash, per share equity value would be in a range of €22.2 to €29.5.
High 17.2% 2.9x 32.5x

The transaction price of €40 represents around 36%-80% premium above the benchmark. Low 5.1% 0.4x 7.0x
Discounted Cash Flow Valuation of Amer
Assumptions

Revenue Growth Rate

Gross Margin 14% 17% 20% 23% 26%

€ € € € €
16. 18. 20. 22. 25.
46% 27 13 23 61 29

€ € € € €
20. 22. 25. 29. 32.
47% 43 97 84 10 76

€ € € € €
24. 27. 31. 35. 40.
48% 59 81 46 58 23

€ € € € €
28. 32. 37. 42. 47.
49% 75 65 07 06 70

€ € € € €
32. 37. 42. 48. 55.
50% 91 49 68 55 17
References
https://www.chinadaily.com.cn/a/201909/10/WS5d77320ea310cf3e3556ac2e.html

https://www.duffandphelps.com/-/media/assets/pdfs/publications/mergers-and-acquisitions/outdoor-recreational-products-industry-insights-s
pring-2018.pdf

https://s3-eu-west-1.amazonaws.com/amersports-wordpress-exove/uploads/20180906115426/Sustainable-Growth-and-Value-Creation-ena
bled-by-focused-transformation-Amer-Sports-CMD-2018.pdf

https://ir.anta.com/pdf/Anta_2019.pdf

http://hugin.info/3020/R/2236187/880564.pdf

https://www.azoyagroup.com/blog/view/chinas-sportswear-market/

https://www.fbicgroup.com/sites/default/files/Apparel_Industry_Series_2019_Part1.pdf

https://asia.nikkei.com/Business/Business-deals/China-sports-brand-Anta-goes-global-taking-on-Nike-and-Adidas

https://ir.anta.com/en/brand.php