Samsonite bags luxury rival Tumi in $1.8bn deal

HONG KONG: Luggage giant Samsonite International SA said yesterday that it would buy US luxury bag maker Tumi Holdings Inc in a deal worth $1.8 billion that analysts said would give the firm a foothold in the lucrative Chinese high-end market.

In a statement to the Hong Kong exchange, where it listed five years ago, Samsonite said it would pay $26.75 a share for the firm — a third more than its value on Wednesday before the likely buyout was sounded.

Samsonite, which saw its shares edge up 1.27% to HK$24 (US$3.09) at the close following the announcement, said Tumi was a “perfect strategic fit” for its business.

“This is a transformational acquisition for Samsonite. It will meaningfully expand our presence in the highly attractive premium segment of the global business bags,” Samsonite chief executive officer Ramesh Tainwala said in a separate statement.

Financial analyst Jackson Wong at brokerage firm Simsen International Financial Group told AFP the purchase was a “good move”.

“Tumi is a premium brand name... higher end names would enhance their brand image,” he told AFP.

“Chinese people love to buy Samsonite. However in the last few years they have been buying extremely luxurious suitcases, and that’s why they are trying to go upscale.”

Numerous western brands in recent years have been setting up shop in China, which is widely considered the world’s biggest luxury market, as a burgeoning middle class drives a shopping frenzy.

France’s Hermes International SA — known for its luxury handbags — opened a four-storey flagship store in China’s commercial capital Shanghai in 2014.

Samsonite raised $1.25 billion in an initial public offering in Hong Kong in June 2011, one of several Western brands — including Prada and Esprit — seeking to use the city to boost their presence in fast-growing Asian markets, particularly China.

But the world’s second-largest economy expanded 6.9% in 2015, the worst performance in a quarter century and a far cry from the years of doubledigit increases.

The country’s luxury market also took a hit from a years-long corruption crackdown.

“The luxury segment has been affected because of austerity in China, but that doesn’t take away from the whole story ofTumi, there’s great opportunity there,” Tainwala told Bloomberg News.

The luxury brand, which sells bags for as much as $1,300, has more than 170 stores worldwide with plans to open up to 20 more this year, according to Bloomberg.

Dickie Wong said Samsonite made the right decision, despite slowing growth in China.

“The Chinese economy is definitely slowing down and the (tourism) market is not growing as fast as it was couple of years ago, but on the other hand, the US market is doing very well,” Wong, executive director of research for Kingston Securities, told AFP.

Samsonite is planning to double annual sales to $4.7 billion by the end of 2020 and has announced nine acquisitions since 2012.

In 2014, the firm bought backpack-maker Gregory Mountain Products for $85 million and in 2012 it acquired high-end luggage brand Hartmann for $35 million.