2005: Rossignol acquisition raises questions over Cleveland’s future
Wednesday, August 31, 2011
Cleveland Golf soon will have a new corporate parent.
The pending change in ownership became public last week when Quiksilver, a $1.3 billion American surfing brand, announced an agreement to acquire French ski giant Groupe Rossignol SA, whose holdings include Cleveland and putter maker Never Compromise.
Quiksilver’s $320 million offer, in cash and stock, ended months of speculation that the Huntington Beach, Calif., company and Rossignol eventually would unite. Under media scrutiny since the beginning of the year, both parties acknowledged there had been a dialogue between the two, but had downplayed its significance.
With the courtship completed, however, Quiksilver and Rossignol executives touted their alliance as an opportunity to “create the No. 1 outdoor sports lifestyle company in the world.” The bottom line: The deal accelerates Quiksilver’s plans to become an all-seasons company, adding Rossignol’s nearly 100-year heritage in winter recreation to its strength in summer sports.
The acquisition’s focus on skis, bindings and snowboards, however, raises questions about how prominent a role, if any, golf will play in this equation.
Cleveland executives said it is Quiksilver’s practice to allow its many brands to operate autonomously, and they expect business operations to remain “status quo.”
But the acquisition also presents opportunities for synergy in golf: Quiksilver could pair Cleveland and Never Compromise with its own golf asset, Fidra – the second apparel brand launched by John Ashworth, who previously fashioned the clothing company that bears his name into a market leader.
“I’m sure if there’s any way we can help each other, we will,” said Randy Romberg, Cleveland’s vice president of communications and marketing. “But I think it’s highly unlikely that we’ll be grouped together (either in a physical location or organizationally as a golf division).”
He said it is premature to discuss whether there would be any cross promotions among Cleveland, Never Compromise and Fidra – or attempts to present the three brands as a unified front, much like the TaylorMade-Adidas-Maxfli trio.
At this point, Romberg said, it is more likely that the brands would cooperate on basic tasks. Established Cleveland, for example, might help upstart Fidra piggyback into Cleveland’s larger account base.
Acquiring Cleveland – which has evolved from an unprofitable wedge maker into one of golf’s top, full-line equipment brands – may have been a “nice bonus” in the deal, but some analysts questioned Quiksilver’s commitment to the company and the game. Though golf certainly qualifies as an outdoor sport, it doesn’t appear to perfectly match Quiksilver’s areas of expertise: primarily youth activities such as surfing and snowboarding.
Such an assessment has analysts and industry observers wondering if Quiksilver may, at some point, spin off Cleveland and its other golf brands. That hunch gained credence, in part, because of an intriguing detail in the Quiksilver-Rossignol acquisition: Rossignol chairman Laurent Boix-Vives “will retain a portion of its direct ownership, an approximate 35 percent interest, in Cleveland Golf for at least 4.5 years,” according to terms of the deal outlined in a Quiksilver statement.
One theory suggests Boix-Vives, who will serve as a Quiksilver adviser following the acquisition, kept a portion of Cleveland so he could capitalize further if Quiksilver decides to sell the golf company.
Some analysts, however, offered another explanation: Boix-Vives retained a stake in Cleveland to keep Rossignol’s selling price affordable and attractive for Quiksilver.
Quiksilver and Cleveland officials dismissed notions that the golf company is unwanted.
“We may not have been the reason for the deal, but (Quiksilver) has made it very clear that they are happy to have us,” Romberg said. He also explained Boix-Vives continuing ownership as the chairman’s desire to stay involved in Cleveland, “in which he’s always had a tremendous personal interest.”
According to Romberg, Boix-Vives believed Cleveland had growth potential even when some of his advisers suggested “it would never amount to more than a little wedge company.” As Rossignol chairman, Boix-Vives requested from Cleveland officials daily written reports updating him about the company’s affairs.
In a statement, Quiksilver chairman and chief executive Robert B. McKnight Jr. said: “Just as Quiksilver is the leader in boardsports, Rossignol leads the winter sports market, and Cleveland is a powerful force in golf. Rossignol’s strong stable of brands is a perfect complement to our portfolio.”