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SurfStitch Group enters deal to acquire Surf Hardware Int'l



Industry Updates

SurfStitch will own SHI brands like FCS, Gorrilla Grip and others

Surfersvillage Global Surf News, 25 November, 2015 - SurfStitch Group announced that it had entered into definitive agreements to acquire 100% of the shares of SHI Holdings Pty Ltd (“Surf Hardware International” or “SHI”) – the “Acquisition” – at an Enterprise Value of A$23.7 million. The total consideration for the Acquisition will be paid 100% in cash.

A fully-underwritten institutional placement of ordinary shares to raise approximately A$50 million has also been launched, with proceeds being used to fund the repayment of certain debts of SHI as part of the Acquisition and transaction costs, as well as to provide SurfStitch Group with the flexibility to pursue further strategic growth initiatives including complementary acquisition opportunities, and for working capital and general corporate purposes.
About the Acquisition

SHI is a global designer, marketer and distributor of innovative and high performance water board sports products and accessories. SHI’s philosophy and reputation for innovation, and the creation of high performance products, has driven SHI to become the leading player in the global water board sports accessory market, with numerous products that have broad appeal to all types of surfers, from the elite level professional tour athlete to the everyday surfer.

SHI houses four distinct, highly recognised global brands, which provide market leading products across a number of different water board sports including Surf, SUP and Kitesurfing:
    •    FCS, SHI’s flagship performance brand, is globally renowned for the invention of its highly regarded detachable surfboard fin systems.
    •    Gorilla, SHI’s lifestyle oriented surf brand, develops vibrant functional traction pads, grips, leashes, fins, board covers, apparel and other surf accessory products.
    •    Hydro, SHI’s swim fin and bodyboard brand, develops functional body boards and swim propulsion fins, catering to a broad audience of ocean enthusiasts.
    •    Softech, SHI’s softboard brand, develops premium quality softboards for the surf specialty market.

Strategic Rationale

The acquisition of SHI strategically aligns with SurfStitch Group’s core objective to create an environment capable of capturing and influencing customers at all points of the surf and action sports lifestyle cycle. SHI’s continuous innovation has created a portfolio of globally recognised brands and high performance products that have immense appeal to SurfStitch Group’s youth demographic. SHI’s product portfolio also delivers SurfStitch Group greater exposure to the action sports hard goods market, which has proven to be one of SurfStitch Group’s fastest growing and most resilient categories.

SHI’s products engage with all major SurfStitch Group stakeholders throughout the business model, creating a highly beneficial and virtuous cycle. Product innovation is at the core of the operations. Working with athletes, SHI ensures products are performance and experience enhancing for every level of user, from the novice to the world class athlete.  Aligning with board shapers, SHI has been able to grow a leading market share in the key markets of Asia-Pacific, the US, Europe and Japan, and just as importantly, has developed key relationships with major manufacturers in surf.

SurfStitch Group can leverage SHI:
    •    By accessing its high profile athletes (both sponsored and not sponsored), board shapers and global brands to curate premium and engaging content, which can be displayed on SurfStitch Group’s digital media platforms of over 6 million users;
    •    Through Garage Entertainment & Production, content creation will showcase the world’s elite athletes using SHI products and reach a wide audience of action sports followers;
    •    Through athlete participation and engagement on Stab, combined with content co-creation and branding with complementary action sports brands aiming to legitimise their products;
    •    Through the surf enthusiast and core surfer who repeatedly checks the surf conditions on Magicseaweed and receives targeted product suggestions of SHI hardware to match surf conditions in their targeted regions; and
    •    Through The Lens, to provide unique insights into the lives of athletes and shapers, product reviews and new and exclusive content.

By leveraging relevant content across all these platforms, SurfStitch Group can attract and retain a rapidly evolving and increasingly sophisticated customer base, among all types of action sports consumers.

Importantly, SHI’s products and content that will be leveraged across SurfStitch Group’s media platforms will be monetised through SurfStitch Group’s e-commerce platform. SWELL has the global reach, and capabilities to leverage content and end-user insight to provide SHI with feedback, attained through media platforms and purchasing behaviour analysis, that will enhance product development. As SHI incorporates athlete and mass consumer feedback into their product development, they will be able to further entrench their products among consumers, shapers and manufacturers. 

“SHI’s brands and products are globally renowned in the surfing and water board sports industries. We are extremely excited by the Acquisition and to strengthening our long-standing relationship with SHI. We look forward to collaborating with SHI on the design and sale of new and innovative products, as well as creating premium and engaging content that can be shared with surfers and fans around the world via SurfStitch Group’s digital ecosystem,” said Justin Cameron, Chief Executive Officer of SurfStitch Group. 

Integration and Business Structure

Upon completion of the Acquisition, SurfStitch Group will seek to integrate and scale-up SHI’s e-commerce capabilities. SHI’s significant brand equity, intellectual property and ongoing innovation efforts will offer opportunities to create new products in existing and adjacent categories, which can be leveraged across SurfStitch Group’s commerce businesses.

As part of the strategy, SurfStitch Group over the next 12-24 months will also open 3 flagship SWELL stores in key cities across the globe. The performance based flagship doorways will become the global destination for the action sports and youth demographic, with an enhanced shopping experience that will leverage content and commerce across physical doorways.  The stores will provide SurfStitch Group's 600+ Brands unique and exclusive opportunities to launch products globally in a combined bricks, digital and content world. In addition, SurfStitch Group’s full media and content spectrum will be on display with the stores featuring ‘doorways’ into each section of the SurfStitch Group ecosystem.

Surf Hardware, SHI, SurfStitch, Gorilla Grip, Industry, FCS, Business Updates

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