On the evening of December 17, Xtep International (HK:01368) announced that it has signed an agreement with Wolverine World Wide, Inc., the American footwear company, to further develop the Saucony and Merrell brands in the operational regions of their joint venture. With this acquisition, the joint venture will become a wholly-owned subsidiary of the group, and the related agreements will terminate.
In 2019, Xtep International announced a joint venture agreement with Wolverine to establish a company that would develop, market, and distribute Saucony and Merrell branded footwear, apparel, and accessories in Mainland China, Hong Kong, and Macau. According to the joint venture agreement, Xtep and Wolverine each contributed approximately 155 million RMB as initial capital.
Additionally, under this agreement, Xtep Group’s wholly-owned subsidiary XMS Sports will acquire 40% of the ownership interest in Saucony Asia IP Holdco. Both parties will establish a joint venture agreement for the management and operation of Saucony Asia IP Holdco.
Saucony Asia IP Holdco is a limited liability company registered under the laws of Delaware, USA. Its purpose is to hold, license, and manage the intellectual property related to the Saucony brand in the operational regions of the joint venture, specifically holding the intellectual property of the Saucony brand in Mainland China, Hong Kong, and Macau.
The agreement also states that if Saucony’s intellectual property is sold globally or if Wolverine undergoes a change of control, XMS Sports will have the option to purchase an additional 35% or 60% ownership interest in Saucony Asia IP Holdco.
The total cost of the transaction is approximately $61 million, to be paid from the group’s internal cash reserves. The transaction is expected to complete by or before January 1, 2024.
Xtep Group noted that since 2019, the joint venture has demonstrated exceptional operational capabilities in managing Saucony and Merrell brands, particularly with Saucony becoming the group’s first newly acquired brand to turn a profit in the first half of 2023.
In the first half of 2023, Xtep Group’s revenue grew by 14.8% to 6.522 billion RMB, and net profit attributable to the parent increased by 12.7% to 665 million RMB. Revenue from the professional sports division, represented by Saucony and Merrell, increased by 119.9% to 344 million RMB, accounting for 5.3% of total group revenue. This division also recorded a net profit of 9 million RMB for the first time. As of June 30, 2023, Saucony and Merrell have 80 and 5 stores in Mainland China, respectively.
The group further stated that through collaboration with Wolverine in product innovation, the group will continue to design and develop customized product lines for Chinese consumers, which currently account for about half of Saucony and Merrell’s sales in China. This will provide opportunities to expand into global markets and increase the scale of Saucony and Merrell’s operations.
For Wolverine, this strategic move shifts the business model from joint venture to licensing and distribution rights, allowing Xtep to exclusively manage the development, marketing, and distribution of Saucony and Merrell products in China.
Furthermore, Wolverine has signed a final agreement to sell its Asian Wolverine leather business to Interhides Public Company Limited for approximately $9 million. Earlier this year, Wolverine sold its U.S. Wolverine leather business to New Balance for $6 million.
In the recent years, Wolverine has focused on streamlining its brand portfolio and concentrating resources on growth brands. In February, it sold the Keds brand to DSW’s parent company Designer Brands, Inc., and also signed an exclusive licensing agreement with Designer Brands for the Hush Puppies brand in the U.S. and Canada.
About Xtep International:
Founded in 1987 as “Sanxing” and rebranded as Xtep in 2001, Xtep International Holdings Limited listed in Hong Kong in 2008. Apart from its main brand Xtep, it also owns international brands including Saucony, Merrell, K-Swiss, and Palladium.
About Wolverine:
Wolverine is a leading designer, marketer, and licensor offering a wide variety of high-quality casual and outdoor footwear and apparel, athletic footwear and apparel, children’s shoes, work boots and apparel, uniform shoes, and boots. Wolverine operates globally in about 170 countries and regions and has direct operations in the U.S., Canada, UK, several European countries, and the Asia-Pacific region. It relies on a network of third-party general agents, licensors, and joint ventures in other regions (Latin America, parts of Europe and Asia-Pacific, the Middle East, and Africa). Wolverine trades on the New York Stock Exchange and markets a variety of shoe styles under well-known brands including Bates, Cat, Chaco, Harley-Davidson, Hush Puppies, HYTEST, Merrell, Saucony, Sperry, Sweaty Betty, and Wolverine.
| Source: Xtep Group Announcement, Luxeplace Historical Reports
| Image Credit: Xtep International Official Website
丨 Reporter: Wang Jiaqi
| Editor: LeZhi
