13980903:VinnieF said:
Micromanagement is not a worry for takeovers like this and not why people should be upset.
As you say, these companies would be a small portion of their business. This means if a company like Armada starts underperforming there's little incentive to try and save it, it would make more sense for them to just axe it. There's also less intimacy with the company and the product, so cuts to quality and staff are far more likely.
Also the most obvious reason to be against a Chinese takeover is the economics of it. Profits are now going to China instead of Finland. This means lost government revenue in corporate tax and income tax on shareholders. Positive trickle-down effects are now in China, not Finland.
There is no positive to this. Only negatives.
FWIW, Armada was acquired for ~$4.1m USD but had annual net sales of $10mn USD. Amer's 10Q (or whatever they call the quarterly EU filings) said it had no material impact on their FY results.
Despite this, management said it had been one of their best acquisitions.
The reason it was one of their best? Intangible assets. The brand appeal to millennials saw it net double digit growth and profitability become in line with that of other brands. During the acquisition the trademark of Armada was valued at 2.2mn Euros with a 10 year amortization life.That's over half the acquisition value right there. They're not going to get rid of Armada until they find the cost exceeding the value and that means people have to stop buying their skis.
Amer Sports already has one of the biggest ski manufacturing footprints given the size of their portfolio (Atomic, Salomon, Armada). 75% of their skis are manufactured in Bulgaria, the rest are manufactured in Austria. The wood cores from their skis come from Germany, Austria, and Switzerland.
This means that if they are to switch their manufacturing footprint to China, they'd either need to change their core materials OR transport that wood across Europe and Asia to China.
That's not too cost-efficient. Amer Sports was already able to make Armada profitable thanks to manufacturing simplification. Now, I'm not too sure what this means because it wasn't exactly disclosed in any of the sellside reports or Annual Reports I read but it'd make sense to assume that building a new manufacturing plant/processing manufacturing expertise and processes between plants in EU and China would not be cost effective.
It's clear that you're against this move and I can understand why but to say there are no positives and are only negatives is just wrong.
1. Breaking into China is extremely difficult. The Chinese government often makes it harder for foreign-controlled companies to break into the Chinese market due to the Made in China 2025 policy. However, being owned by a Chinese company or partnered with one often makes it much easier to get around these barriers. This acquisition will remove some of the blocks Amer Sport would have faced moving into the country.
2. Acquiring a new sales force is not cheap nor are they quickly effective especially when moving into a country with little to no exposure to a certain business segment. With this acquisition, Amer Sports will now be able to use the Anta Sports sales team as well as network to get their products into the Chinese market in a faster and more efficient manner than they would have been able to do on their own. FWIW, in 2009 they sold just 11mn Euros worth of product in China, in 2016 it was 100mn. The US market to them is worth over $1bn. The Chinese market is almost certainly larger than the US market for all these goods.
3. With this new market, there will be a need for more products. More products means more manufacturing. More manufacturing means more workers. Now, there is a very good chance that Anta will want Chinese manufacturing facilities, BUT, that does not mean there won't be an increase out of the European facilities. It takes time to build new plants and then ramp up manufacturing. It doesn't happen overnight.
If anything, this acquisition means that Armada is more likely to survive than actually fall apart.
Now let's critique some of your other points:
1. Amer Sport has grown at a slower rate over the past 5 years than Anta Sport. By your logic, Amer Sport would be more likely to cut these smaller parts of their business than Anta. As stated above, this new move brings Amer into a massive market which is hugely beneficial to growth for all of their portfolio companies.
2. Anta has not seen a reduction in employees since 2010-2011. Amer Sports is roughly the same. They've been flat however while Anta has grown.
3. The intimacy argument is just bad. How do you know it didn't change when it was acquired? It's hardly been a year. What makes you think Anta will do that?
4. Anta has no other winter-sports brands like Amer Sports (they do have a JV with Descente JP). They focus on more spring/summer/fall sports, which caters to the lower and middle-income groups. Amer Sports does not with the likes of Enve, Mavic, Arc'teryx, Peak Performance, Suunto, etc. and we all know skiing is certainly not cheap. This almost certainly means that Anta will not look to change their products to fit the lower-class but will now cater to the upper class. There is almost zero incentive for them to try to change these brands to cater to that lower class nor would they cut them outright.
Finally, Amer Sports will be operated independently of Anta, with the current executives from Amer set to continue on.
**This post was edited on Jan 4th 2019 at 10:39:23am
