Xtep announced on Sunday that it would be priced at $61 million (about 4RMB 3.4 billion) and 40% ownership interest in Saucony in China. This means that Xtep will have a greater voice in the Chinese market, and the synergy between Saucony and Xtep's main brand in the running field is expected to usher in a bumper harvest.
According to the announcement, Xtep has entered into a partnership with Wolverine World Wide, IncWolverine, together with its subsidiaries, Wolverine Group) entered into an agreement to acquire the interest in the 2019 joint venture of Wolverine Group, which will henceforth become a wholly-owned subsidiary of Xtep. At the same time, Xtep's wholly-owned subsidiary, XMS Sports CoLimited (XMS Sports) will acquire a 40% interest in Saucony Asia IP Holdco, which holds the intellectual property rights of the Saucony brand in Chinese mainland, Hong Kong and Macau. In addition, in the event that the intellectual property of the Saucony brand is sold worldwide, or if there is a change of control of Wolverine, XMS Sports will receive a further subscription right to acquire a further 35% or 60% ownership interest in Saucony Asia IP Holdco.
The acquisition will be fully paid for in Xtep's internal cash and the transaction will close on or before January 1, 2024. Upon completion of the transaction, Xtep will significantly strengthen Xtep's control over the sales, marketing, distribution and product innovation of Saucony and Merler in China.
Through the capabilities and expertise of Xtep and Wolverine in product innovation, Xtep will continue to design and develop customized product lines for Chinese consumers (China line products) while sourcing the products launched by Wolverine. The China line currently accounts for about half of the sales of the Saucony and Myle brands in China, which will give Xtep the opportunity to expand the global market and expand the business scale of the Saucony and Myle brands. Going forward, Saucony will continue to develop its existing functional collections, as well as its retro and commuter collections, to expand its fashion and casual offerings, strategically expanding to meet the growing demand for personalized and versatile apparel in China.
In 2019, Xtep established a joint venture with Wolverine Worldwide to start the development, marketing and distribution of the Saucony and Merle brands in the domestic market. In the past three years, Saucony's revenue has increased exponentially. In the first half of 2023, Saucony's professional sports division recorded revenue of 12 times the growth to reach 3At 4.4 billion yuan, Saucony also became the first new brand under Xtep to achieve profitability. In May 2023, Xtep's Shanghai operation center was put into use, and Saucony became the first brand to enter the market. As of the first half of 2023, Saucony and Melle have 80 and 5 stores in Chinese mainland, respectively.
At the same time that the market decided that Saucony would become Xtep's "second growth" engine, the road running circle also "voted with its feet" to recognize Saucony's market position. In this year's Shanghai Marathon, Xiamen Marathon, Beijing Marathon and Wuxi Marathon, Saucony ranked among the top three international brands in terms of wearing rate. Among them, in the overall running shoe wearing rate of Shanghai and North Malaysia, Saucony ranks among the top three among all brands at home and abroad.
Ding Shuibo, Chairman and CEO of Xtep Group, said: "This transaction demonstrates the Group's confidence in the future of the Saucony and Myle brands, and its commitment to further unlock the commercial potential of the brands in China. The merger of ownership and management of the joint venture will not only maximise the synergies between Xtep's main brand and the Saucony and Myle brands in terms of product innovation, marketing and distribution channels, but will also help strengthen the Group's control over the strategic direction and operational efficiency of the brand. The acquisition is in line with Xtep's expansion strategy and profitability drivers, and will strengthen the Group's competitive position as a preeminent multi-brand group that fully meets the changing needs of consumers in the Chinese market. 」