Samsonite to buy Tumi for about US$1.8b in biggest deal

[SINGAPORE] Samsonite International SA, the world's largest branded-luggage maker, agreed to buy luxury baggage maker Tumi Holdings Inc for about US$1.8 billion in its biggest acquisition since selling shares to the public five years ago.

Tumi investors will receive US$26.75 per share in cash, Samsonite said in a Hong Kong stock exchange statement on Friday. That's about 33 per cent more than the New Jersey-based company's closing price on Wednesday, before the likely takeover was reported. Tumi jumped 30 per cent on Thursday in US trading.

The transaction values Tumi at about three times its trailing 12 month revenue, double the 1.5 times median for acquisitions in the apparel, footwear and accessories segment the past three years, according to data compiled by Bloomberg.

Samsonite has announced nine acquisitions since 2012 as it expands into distributing and selling other travel and non-travel bag brands, with plans to double annual sales to US$4.7 billion in the six years ending 2020.

"The Tumi acquisition is coherent with Samsonite's strategy to create a range of travel luggage brands at various price points," said Mario Ortelli, an analyst at Sanford C Bernstein, said ahead of the announcement.

"Tumi is one of the few high-end bag brands in the high-end travel business."

Tumi has net cash of about US$94 million, bringing the transaction value to US$1.71 billion, or about 18 times pretax earnings, compared with the 16 times median for comparable deals, according to data compiled by Bloomberg.

Tumi, which sells bags for as much as about US$1,300 according to its website, has 177 standalone stores worldwide and plans to open 15 to 20 more this year, with an increasing focus on international markets. Net sales increased 4 per cent to US$547.7 million in 2015.

Mansfield, Massachusetts-based Samsonite bought electronic-device protective case maker Speck Products for US$85 million in 2014 and assets of High Sierra Sport Co for US$110 million in 2012. Samsonite had cash and near cash equivalents of US$203 million as of end-June 2015.

Samsonite has long had its eye on Tumi. Chief executive officer Ramesh Tainwala said in Jan 2012 when he was in charge of Asia and the Middle East that Tumi was a "natural fit". Five months later, Tainwala's predecessor Tim Parker ruled out buying its smaller competitor, saying it was too expensive.

BLOOMBERG