Authentic Brands Group Makes Binding Offer to Purchase Boardriders
And, get the latest on the status of Authentic’s offer for Boardriders, here, with the signing of a definitive agreement April 11, 2023.
The offer marks the start of an exclusivity period between the two. Financial details of the deal, which is expected to close in the third quarter, were undisclosed.
“As an early believer in the global and commercial appeal of action sports, this brings me back to the roots of my early career,” Authentic founder, Chair and CEO Jamie Salter said in a statement. “Along with the great brands and impressive global reach that will come with this acquisition, we see Boardriders’ potential as a thriving online marketplace under Authentic’s ownership. With Boardriders’ proven retail playbook, we also see tremendous opportunities to accelerate the expansion of its shop-in-shops, branded retail stores, wholesale and e-commerce worldwide.”
With the Boardriders acquisition, Authentic would own nearly all of the biggest brands in the industry, including Quiksilver, Roxy, Billabong, Volcom, RVCA, DC, and Australian retailer Surf Dive ‘n Ski. That’s in addition to more than 500 stores, 7,000 wholesale accounts, and an e-commerce business spanning 35 countries. The company said the group accounts for $2.9 billion in retail sales each year.
“We are proud of our deep connection to the global action sports community, industry-leading brands, and world-class teams,” Boardriders CEO Arne Arens said in a statement. “Under Authentic’s ownership, Boardriders will be uniquely positioned to expand the reach of our iconic brands to millions of consumers, capture market share in our core categories, and grow in white spaces, including premium athleisure, training, and lifestyle.”
Authentic operates with a licensing model, and if it opts to license the Boardriders brands, nearly every large surf brand in the industry would be licensed at the wholesale level, with the exception of Rip Curl, which is owned by a public company in New Zealand.
Volcom is operated by Liberated Brands, which has the master license for the Volcom brand globally. The La Jolla Group is the licensee for O’Neill Clothing, and Bluestar Alliance, which had been in the running to acquire Boardriders, owns Hurley, and licenses the brand to a wide range of licensees in different categories.
Although an offer has been made, there is still a lengthy closing process that needs to be completed – a process that is complicated by Boardriders’ large operation in France. Salter declined an interview request until the deal is officially closed.
No Licensing Deals Announced Yet
With the closing process still ahead, Authentic has not announced any licensing deals for Boardriders brands yet. However, it is very likely Liberated Brands, in which Authentic has a financial stake, will be taking on some of the Boardriders brands in some capacity.
The acquisition could mark a new era in the surf industry if the big brands move into more mainstream – or downstream – channels and smaller industry brands get more opportunity to grow in core shops.
However, industry retailers rely heavily on brands such as Billabong, Billabong Women’s, Quiksilver, Roxy, and in some cases, RVCA, to drive volume in their stores, and it is unlikely store owners would change their brand mix in the short term.
The Boardriders-owned brands not only drive traffic and sales for retailers, but they also have strong global recognition and influence the overall perception of the surf industry around the world.
“I think all of my friends in the surf specialty business are looking forward to the sale being finalized. We’ve kind of been in limbo. Boardriders is so important to us,” said Kim Ball, High-Tech Surf Sports owner.
Ball, at the same time, raised a question that’s weighed on the minds of specialty shops since rumors of a sale first swirled: “Will the new owner let the brands exist separately as it is now, or will it be more like a Blue Star-Hurley, big box distribution model with multiple vendors making Hurley product?”
Oaktree to Exit the Space
Once the sale is complete, it could mark the exit of Oaktree Capital Management from the action sports space. Oaktree, a distressed debt specialist, put the two companies under one roof after the formerly independent Quiksilver Inc. and Billabong International Limited took on too much debt and needed financial help.
However, the grand vision of putting all the brands on one global platform did not lead to big growth for the company. Boardriders is under pressure because of looming debt payments – according to a Moody’s report in 2022, the majority of Boardriders’ approximately $430 million in debt is due in 2024, and a small portion is due in 2023.
According to Boardriders insiders, the company ended its most recent fiscal year Oct. 31 with approximately $1.7 billion in revenue, which was slightly higher than pre-pandemic levels.
However, Boardriders was not able to fully take advantage of the pandemic boom that positively impacted many outdoor companies, in part because of significant distribution center challenges in North America when the company moved all of the brands into one facility. Boardriders was unable to ship to retailers on time for many months, during a period of record demand for industry brands.
Oaktree did live up to its promise to keep the front end of the Boardriders brands distinct, but it centralized and integrated a lot of the brands’ backend operations. Some insiders told us that move led to longer lead times and less responsive operations.
Authentic Brands Group Financials
Authentic’s portfolio consists of more than 40 brands, including Eddie Bauer, Izod, Lucky Brand, Nautica, Reebok, Sports Illustrated, Ted Baker and Forever 21.
The privately held Authentic doesn’t typically report its financials. However, credit rating agency Moody’s said the company had revenue in excess of $950 million for the year ended in September.
“The company has exhibited steady operating performance over the past few years, including demonstrated resilience through the coronavirus pandemic,” Moody’s noted.
Authentic has a heavy debt load, however.
Moody’s recently assigned a B1 ratings to Authentic’s proposed senior secured first lien credit facilities, including its extended and upsized $240 million revolving credit facility, $1.5 billion term loan, and $600 million delayed draw term loan – all of which are due in 2028.
The proceeds of the proposed new term loan will be used to refinance the company’s existing senior secured first lien term loan due in September 2024. The proceeds of the delayed draw term loan will be used to finance a potential acquisition of Boardriders, Moody’s said.
All told, Authentic will have approximately $2.3 billion of debt after the Boardriders acquisition, according to Moody’s.
Uncertainty Continues for Employees
The Authentic acquisition will likely mean major changes for Boardriders employees around the world because Authentic does not typically operate brands itself, preferring to use a licensing model.
After more than six months of sale speculation, employees might not know their fate until the deal actually closes.