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Samsonite International has bagged US-based competitor Tumi in a US$1.8 billion deal that will give the world's largest luggage maker a foothold in the premium luggage segment.
Hong Kong listed-Samsonite, which has been eyeing Tumi for 15 years, will finally acquire the luxury suitcase and accessory manufacturer for US$26.75 per share. This represents a premium of about 38 per cent to Tumi's volume weighted average price of US$19.34 for the five days up to March 2, when rumours of the acquisition first emerged.
The deal is expected to be a win-win for both, allowing the two companies to play to each other's strengths in areas such as product portfolio and geographical reach, while reaping cost synergies.
"Tumi is a truly perfect fit," Samsonite's chief executive Ramesh Tainwala told The Business Times in a phone interview from Hong Kong. "Samsonite has a strong presence in the mid-market and entry (level categories). This gives us play in the premium segment."
Shares in Samsonite rose to close at HK$24 on Friday, up HK$0.30.
With 2,000 distribution points across over 75 countries, New-Jersey based Tumi's range of products include rolling luggage, tablet cases and briefcases. Its checked luggage, for instance, can start at US$500.
Tumi chief Jerome Griffith added: "Samsonite will bring Tumi to new and growing markets, while still maintaining the high quality Tumi is known for."
Presently, New-York listed Tumi gets under a third of its business from outside of North America, which suggests significant room for growth outside the region. Conversely, Samsonite has a firm handle on doing business in Asia and Europe, where it receives over 60 per cent of its revenues.
In particular, Mr Tainwala singled out China, where an emerging middle class is travelling in droves and Samsonite gets ten per cent of its revenue. For Tumi, the figure is still under one per cent.
For the year ended Dec 31, 2015, Tumi clocked a 4 per cent rise year on year in sales to US$548 million, of which just 17 per cent came from the Asia Pacific. Meanwhile, net income increased nearly 9 per cent last year to US$63 million.
"We believe with our reach, there's no reason we should not be able to significantly increase their revenue opportunities," said Mr Tainwala, adding that he expects Tumi's topline to double within the next five years. "Where Tumi can help us is they are much better in their ability to design and develop business products." These would be sold under its flagship Samsonite and American Tourister brands.
At US$1.8 billion, the deal represents an enterprise value to last year's adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) multiple of 13.6 times.
"Samsonite may lift Tumi's profitability, as its higher-volume supply chain can lower the smaller luggage maker's manufacturing costs," wrote Bloomberg Intelligence analyst Catherine Lim in a report.
Meanwhile, Samsonite may be able to sell more non-travel items, where Tumi gets nearly two-thirds of its sales.
Ms Lim added: "The expanding global luggage leader plans to leverage Tumi's strengths in business items and women's bags to boost sales of the merged entity."
The Luxembourg-based luggage group has also scooped up a number of other companies in the last two years, including airport retailer Rolling Luggage and Italy's Chic Accent.
Samsonite plans to fund the acquisition through bank financing, which has been arranged by Morgan Stanley, HSBC, SunTrust and MUFG. The transaction is expected to close in the second half of this year.