Huntington Beach-based Quiksilver Inc.’s investors and analysts breathed a sigh of relief last week as the clothing maker said the sale of its struggling Rossignol ski unit is set to close early this month, even if the company is getting a lot less in the deal and needs to raise money.
Quiksilver now is set to sell Rossignol for $52 million, down from $130 million when the deal was struck in August.
The deal calls for Quiksilver to keep selling Rossignol clothes through winter, which should bring in $6.5 million to $13 million in additional sales.
Quiksilver could continue to license the Rossignol name for clothes beyond winter, the company said.
Shares of the maker of clothes inspired by surfing, skateboarding and snowboarding jumped on the news last week as Wall Street welcomed word of the sale’s progression, regardless of price.
Quiksilver had a market value of about $330 million last week.
“In this time of unprecedented challenge in the global credit markets, price concessions were required to achieve a final sale of Rossignol,” Chief Executive Bob McKnight said in a statement.
Rossignol, a French maker of skis, snowboards and related gear, has been a drag on Quiksilver since it was bought for $560 million in 2005.
Two months ago, Quiksilver said it had struck a deal with a former Rossignol executive to buy the business.
The financial crisis that started a few weeks later cast doubt on the deal’s prospects, driving a 70% drop in Quiksilver’s stock since September, according to Caris & Co. analyst Claire Gallacher.
Some investors feared the buyer, Chartreuse & Mont Blanc, and its financial backers wouldn’t be able to pull off the deal.
“This announcement allays concerns that it might not get done due to the challenging global credit markets,” analyst Mitch Kummetz of Robert W. Baird & Co. said.
Now a sale has financing in place and just needs European labor union input and the usual closing conditions, Quiksilver said.
The company didn’t offer details on the buyer’s financing.
Australia’s Macquarie Group Ltd. is the majority owner of Chartreuse & Mont Blanc, which is headed by former Rossignol chief executive Bruno Cercley.
Jarden Corp., a Rye, N.Y., maker of outdoor products, is a minority investor in Chartreuse & Mont Blanc.
Macquarie, a diverse investment bank, has seen its shares plummet amid the financial crisis. It has been selling real estate and other assets and reviewing operations.
Some have raised concerns about the company.
But the Rossignol deal is small for Macquarie, which has $140 billion in assets.
Jarden also has the heft to pull off a deal with more than $5 billion in yearly sales.
Representatives from Macquarie and Jarden weren’t available for comment last week.
Deals Still Flowing
A tight credit market has kept some deals from going through, but small to midsize transactions still are happening, according Chris Ivey, a corporate partner at Newport Beach-based law firm Stradling Yocca Carlson & Rauth.
“Deals are still happening but at lower valuations,” Ivey said. “Larger leveraged transactions have stopped because companies can’t get funding.”
Billion-dollar transactions are few and far between these days, but deals in the $50 million to $100 million range still are occurring, he said.
Quiksilver still faces big challenges.
The company is set to see a larger than expected charge on the sale of Rossignol because of the lower price.
Quiksilver has hired Morgan Stanley to help it look at ways to raise money, including from existing lenders, through a stock sale or a possible private equity investment.
The company reworked a European credit line that was due last Friday. Quiksilver is paying its lender $19 million now and deferring $71 million until March.
Quiksilver said it expects to have about $100 million in cash and equivalents after the close of the Rossignol sale and debt payments made before the close of the company’s fiscal year that ended Friday.
Like other clothing makers and retailers, Quiksilver faces one of the worst downturns in clothing sales in recent memory.
“While we view the Rossignol sale as positive news for the company (in the) longer term, we still see challenges in apparel manufacturing through the rest of the year and into 2009,” Citigroup Inc. analyst Kate McShane said in a report.
The company has a few high-end clothing projects that could help it generate sales from consumers with a little extra cash to spend.
A line of clothing for young women, which launched earlier this year, is selling at department stores such as Nordstrom and surf shops such as Jack’s Surfboards in Huntington Beach.
The collection of silk dresses, pants, blouses and jackets sells anywhere from $60 to more than $100.
The company is also collaborating with Australian designer Sam Elsom to create a collection of hand-tailored suits for men that will be sold in Australia for around $1,000.
