Canadian Tire’s Helly Hansen deal could be launch pad for global expansion: CEO
Canadian Tire Corp. views its $985-million acquisition of Norwegian outdoor clothing and gear maker Helly Hansen as a “major step forward” to diversify its offerings at home and launch new opportunities in global markets.
“This is a brand that we truly believe has a lot of runway ahead of it internationally,” CEO Stephen Wetmore said in an interview.
The Toronto-based retailer has long been one of Helly Hansen’s biggest customers and the deal announced Thursday will bolster a number of its product categories, including camping, hunting and fishing, at both Canadian Tire department stores and its Mark’s clothing chain, he said.
Helly Hansen, which was founded in Moss, Norway, in 1877 and is now sold in more than 40 countries around the world, has “successfully and profitably entered many markets” globally with its outdoor adventure, sailing, skiing and casual industrial brand, Wetmore said in an earlier conference call with financial analysts. “This too will serve as a foundation for us to build upon in future years with existing or new owned brands.”
Canadian Tire identified the Norwegian brand as an acquisition target shortly after it established its consumer brands division. It saw it as an opportunity to strengthen some of its most “strategic and brand-sensitive categories,” but the deal took 18 months to come together, Wetmore said.
“The journey wasn’t easy and worthy pursuits rarely are,” he said.
Wetmore explained in an interview that it took time for the company to convince the Ontario Teachers’ Pension Plan, which acquired Helly Hansen in 2012, to become a willing seller.
The outdoor brand will continue to be sold in a broad range of stores in Canada, not just Canadian Tire stores, the company said. Canadian Tire stores will also carry a wider selection of Helly Hansen items, including the brand’s footwear line.
Canadian Tire will assume $50 million in debt under the deal.
Helly Hansen CEO Paul Stoneham and the management team, based in Oslo, Norway, are expected to continue to lead the business.
“(Canadian Tire) provides us with the ideal platform to further accelerate our growth trajectory and also strengthen our Canadian presence,” Stoneham said. “As a Canadian, I am particularly proud to say that Canadian Tire is the new home for Helly Hansen.”
The deal is expected to close in the third-quarter and Helly Hansen is expected to add value to Canadian Tire’s profits this year.
However, Canadian Tire class A shares fell 5.42 per cent to close at $165.87 in Toronto on Thursday and it reported first-quarter profit that slipped compared with a year ago due to one-time accelerated depreciation charge.
Retail analyst Peter Sklar said he believes the price tag for Helly Hansen was expensive and that the deal might be unnecessary to accomplish some of Canadian Tire’s most immediate goals. “While the acquisition gives Canadian Tire a platform for the international wholesale distribution of existing Canadian Tire house brands, Canadian Tire is not planning on capitalizing on this opportunity for at least several years,” he wrote in a note. “Canadian Tire’s immediate plans are to instead focus on deepening the relationship with HH by carrying a fuller offering of HH products at all of its banners, which we believe could have been accomplished without acquiring the brand.”
Canadian Tire’s chief financial officer Dean McCann said he’s “very comfortable with the price.”
He noted the acquisition presents three opportunities for the company: to strengthen its existing banners by carrying more Helly Hansen items, to take advantage of a very disciplined and well-managed business, and to sell in-house brands internationally.
While it is not in a rush to fulfil the latter, “the opportunity is probably closer” than the several years Sklar indicates, he said.
Canadian Tire reported a firstquarter profit attributable to shareholders of $78 million, or $1.18 per share for the quarter, down from $87.5 million, or $1.24 per share a year ago.