Orange County Business Journal

Action Sports Brands Center of Dealmakers’ Attention

Volcom, Sanuk seen starting season of acquisitions, IPOs Kari Hamanaka Sunday, June 5, 2011

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Rutan’s Dallas: larger companies making strategic buys

Deals are back and that could bode well for local apparel makers.

Recently announced acquisitions of Costa Mesa-based apparel brand Volcom Inc. and shoemaker Sanuk USA LLC of Irvine look like the tip of a wave of buys headed toward the action sports segment of the apparel industry, market watchers say.

“M&A right now is on fire,” said Cary Hyden, a partner in Latham & Watkins LLP’s office in Costa Mesa.

The trend hits the core of Orange County’s apparel industry, long dominated by action sports brands selling clothes and accessories inspired by surfing, skateboarding, snowboarding and motocross.

Small to midsize action sports companies increasingly are seen as attractive investments by larger businesses looking for ready access to youth-oriented brands.

“They’ve seen the successes of the action sports sector and have looked for companies that create an opportunity to build on,” Hyden said.

Hyden, who is co-chair of Latham’s corporate department, advised Volcom on its deal to be acquired for $608 million by Paris-based PPR SA, which owns luxury brands such as Gucci and Yves St. Laurent.

The deal represents a premium of about 40% over Volcom’s average share price in the past three months. It’s expected to close some time during the third quarter.

Less than two weeks after the deal for Volcom, Goleta-based shoe company Deckers Outdoor Corp. announced its $120 million bid to acquire Sanuk, which was represented by Newport Beach-based law firm Stradling Yocca Carlson & Rauth.

Deckers plans to add Sanuk’s sandals and other products to its roster, which includes the Ugg, Simple and Teva brands.

That deal also is expected to close in the third quarter.

Indicator

Two acquisitions in one month is an indicator of cash seeking opportunities, market watchers say.

Hyden currently is working on four deals that he says are “ongoing, and hot and heavy.”

Two of those deals involve action sports companies, which he declined to name.

There’s also the possibility of initial public offerings by apparel companies in the near future, he said.

An initial public offering involving an action sports company is expected to be announced this summer, according to Hyden.

“I suspect we’ll see a steady stream of liquidity events, whether M&A or companies accessing the public markets,” he said.

In January, headphone company Skullcandy Inc. filed to go public.

The San Clemente-based company, while not an apparel company, is considered a part of the industry because of its inspiration from music, fashion and action sports.

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