Amer Sports' China reliance weighs on 2024's first big IPO -sources
31/01/2024 06:00
By Echo Wang
NEW YORK, Jan 31 (Reuters) - Amer Sports' AS.N growing
reliance on China for its revenue is weighing on the appetite of
those considering buying into the sporting equipment maker's
$1.8 billion U.S. initial public offering (IPO), four people
involved in the process told Reuters.
The company behind Arc'teryx outdoor apparel, Salomon
sporting goods and Wilson tennis gear generated 19.4% of its
sales in China in the first nine months of 2023, up from 8.3% in
2020, according to its IPO prospectus.
Most of the company's sales come from the Americas and
Europe, and while revenue in these regions has been growing,
sales in China have been rising much faster. They were up 68% in
the first nine months of 2023 compared to the corresponding
period in 2022, the prospectus shows.
The sources, who requested anonymity to discuss the progress
of the IPO, said that, despite this success, some potential
investors have expressed concerns about Amer Sports' fortunes
intertwining with China's economy.
A spiraling property crisis and a local government debt
crunch has driven many investors to reduce their exposure to
China.
Amer Sports has also warned investors in its IPO prospectus
that escalating trade tensions could in the future lead to
tariffs or other curbs on its ability to sell goods in the U.S.
that it makes or sources in China.
While Amer Sports' IPO book is oversubscribed and the
offering is not in jeopardy, the softening in investor demand
could push the company to play it safe and price the offering at
the bottom or middle of its $16 to $18 per share indicated
range, the sources said, cautioning that no decision has been
taken. Even at the bottom of the range, the IPO would value Amer
Sports at approximately $8 billion.
Amer Sports did not immediately respond to a request for
comment. The IPO is scheduled to price on Wednesday evening in
New York, with the shares debuting on the New York Stock
Exchange on Thursday.
Founded in Helsinki in 1950, Amer Sports was acquired by a
consortium of primarily Chinese firms in 2019 for 4.6 billion
euros ($5 billion). The biggest shareholder, with a 56% stake,
is Anta Sports, a Chinese athletic clothing manufacturer with
aspirations to take on Western rivals such as Nike NKE.N and
Adidas ADSGn.DE .
Under Anta's ownership, Amer Sports' ties to China have
grown. The company says in its IPO prospectus it now has key
suppliers and manufacturing facilities in China, and that about
33% of its products sourced from third-party suppliers were
manufactured in the country in 2022.
Some of the investors have also expressed that the company's
Salomon and Wilson brands are showing lower margins and slower
growth than Arc'teryx, the sources said. While Arc'teryx sales
rose 65% in the first nine months of 2023, Salomon and Wilson
sales rose 35% and 10%, respectively, the prospectus shows.
Amer Sports represents a major test for the U.S. IPO market
in 2024 after a sizeable but smaller company, BrightSpring
Health Services BTSG.O , priced its $633 million offering last
week below its indicated range. The shares of the healthcare
services firm, which is owned by private equity firm KKR
KKR.N , have since been trading below their discounted IPO
price.
Social media platform Reddit is planning to list in New York
in March, Reuters reported last week, in one of 2024's
most-anticipated listings.
(Reporting by Echo Wang in New York
Editing by Greg Roumeliotis and Lincoln Feast.)
((Greg.Roumeliotis@thomsonreuters.com; +1 646 223 6022; Reuters
Messaging: greg.roumeliotis.thomsonreuters.com@reuters.net))