Daily Management Review

Expanding Footprint in Premium Luggage Market, Samsonite Announces Buying Tumi for $1.8 billion


Expanding Footprint in Premium Luggage Market, Samsonite Announces Buying Tumi for $1.8 billion
With the intention of expanding presence and reach in the global luxury luggage market, Samsonite International S.A. said on Friday it would buy Tumi Holdings Inc for $26.75 per share in an all-cash transaction. The deal has valued Tumi at $1.8 billion.
Subject to regulatory and shareholder approvals, the Hong Kong-listed Samsonite expected the deal to close in the second half of this year adding that the deal would be financed by bank loans.
Apart from enhancing its distribution and product development, the deal is expected to bring cost savings in sourcing, logistics, sales and marketing for Samsonite.
The new company will list in Hong Kong. while US firm Tumi is currently traded in New York, Luxembourg-based Samsonite is already listed in Hong Kong.
"It will meaningfully expand our presence in the highly attractive premium segment of the global business bags, travel luggage and accessories market," Samsonite chief executive Ramesh Tainwala said in a statement.
Samsonite shares rose up to as much as HK$25.2, their highest since October as investors applauded the deal. Outpacing a 0.6 percent gain in the benchmark Hang Seng Index, the stock was up by 2.3 percent by midday even as it trimmed gains.
"It is a perfect match in many aspects such as retail channels and regional mix, category mix and even price points," said Boyoung Kim, an analyst at BNP Paribas.
"It can bring huge synergies in the long term," she added.
The statement said that the price being paid by Samsonite was in the deal represented a 38 percent premium to New Jersey-based Tumi's volume weighted average price of $19.34 for the five days up to and including March 2.
On a year-on-year basis, Tumi's net sales increased 4 percent in 2015 to $548 million. 68 percent of this dale was accorded to its which North American business. Its net income rose 8.6 percent last year to $63 million.
The company planned to expand Tumi's presence in Asia and Europe, while strengthening its business in North America, said Samsonite Chief Executive Officer Ramesh Tainwala.
Morgan Stanley Asia Ltd acted as financial advisor to Samsonite, and Goldman Sachs & Co. acted as financial advisor to Tumi.
Samsonite sells Lipault travel bags, high-end Hartmann suitcases, American Tourister luggage, and High Sierra and Gregory backpacks apart from its flagship brand.
Last February the company had bought Rolling Luggage which operates stores in airports, and the Italian travel luggage retailer Chic Accent in October as it is belived to be on an acquisition spree.
Offsetting the slowdown in China, accounting for 10 percent of its global sales, is another intention of Samsonite behind the purchase. It expected its China sales growth to halve from the second half of the year, the company has previously said.