Hong Kong-listed Samsonite International, the world’s largest maker of luggage, is looking to bag more acquisitions.
The company, which raised $1.25 billion from its floatation in Hong Kong in 2011, made a foray outside its traditional luggage sector in May when it bought Speck Products, which distributes protective cases for smartphones. That $85 million acquisition looks like being the shape of things to come.
According to Ramesh Tainwala, Samsonite's chief operating officer, the company remains on the prowl for more deals to bolster growth and has the ability to undertake more than $1 billion worth of acquisitions. “We have a lot of firepower,” he told FinanceAsia in a recent phone interview.
Samsonite has had a slow start when it comes to deal-making but that is not for the lack of trying. In 2012 it wanted to buy Tumi but the rival luggage maker snubbed its advances, choosing instead to list in the US. So instead it bought outdoor backpack maker High Sierra and high-end luggage brand Hartmann.
But there was a death of activity in 2013.
Samsonite did look at various opportunities but, in the end, nothing came of it for a myriad of reasons.
“Sometimes the valuations are not right, sometimes the owners are not ready,” Tainwala said. “They believe they are ready but by the time they get to the table, they start to have second thoughts and sometimes we have legal issues that crop up during due diligence.”
The acquisition of Speck was the first time the company expanded into a so-called adjoining category. Through the deal, Samsonite hopes to grab a piece of a market estimated to be worth $2.3 billion in the US alone. “Speck is a brand which we believe will give Samsonite a foothold in the fast-growing category of protective cases," Tainwala said.
Samsonite tried previously to produce and sell protective cases under its own brand but had little success, Tainwala said, in part because the Samsonite brand is so strongly affiliated with travel.
Synergies, China
Tainwala said there are synergies between Speck and Samsonite. For instance, the company has a limited presence outside of the US and can leverage on what Tainwala calls the “Samsonite machine," namely its vast sourcing and logistics network to expand in regions beyond the US.
Earlier this year, Samsonite also bought Lipault, a French luggage brand, for $26 million. These are hardly the hefty acquisitions but are a start for the baggage maker, which had $225 million of cash on its balance sheet end December 2013 and little debt.
At the moment, the US is Samsonite's biggest market. But moving forward, with affluent Chinese discovering travel, Rainwala said that it "wouldn’t be in the distant future" that China should overtake the US in terms of sales.
Samsonite's China sales were hurt by an austerity drive last year as the central government clamped down on extravagant spending. China sales grew by 7.9% in 2013, decelerating from the 23.1% growth seen in 2012. But for the coming quarters, Tainwala has a more optimistic outlook.
"The underlying growth in China in terms of the growth in the travel industry is still very robust and we [will] start to see a significant improvement in our outlook for our Chinese business in coming quarters," Rainwala said.
