Rip Curl founders, Doug “Claw” Warbrick and Brian “Sing Ding” Singer, who together own 72 per cent of the company, could make more than $100 million each if the brand fetches the hoped for price of close to $400 million. However, sources said $300 million would be a more realistic price.
Rip Curl has hired Bank of America Merrill Lynch to explore a partial or full sale of the business, which is understood to have suffered a decline in profits similar to Billabong International, which is also on the sales block following approaches from private equity giants TPG and Bain Capital.
The Australian surf brands have been hit by a retail downturn as young surfers increasingly search for the latest cool brand and a strong Australian dollar hurts exporters.
Mr Warbrick and Mr Singer founded Rip Curl at a time when surfing was a cottage industry. The company initially made surfboards but a year later began producing wetsuits after the partners, spotting a gap in the market, took over an old house in Torquay and bought a pre-World War II sewing machine.
Rip Curl has since become one of the largest boardwear brands in Australia, Europe and South America, sponsoring hundreds of events every year including the Rip Curl Pro at Bells Beach. In addition to selling to independent retailers worldwide, Rip Curl operates corporate stores in Australia, New Zealand, Europe, USA, Canada, England, Israel, South America and South Africa. About half its sales come from Australia.
Rip Curl booked a $7.9 million net profit in the year to June 30, 2011, from $15.5 million in fiscal 2010, according to its most recent accounts lodged with ASIC. Sales fell 8 per cent to $362.4 million. During the 2012 financial year Rip Curl acquired 24 Rip Curl branded and multi-branded stores in Australia and South Africa.
While Billabong and US-rival Quiksilver have opted for stockmarket listings as a way of fuelling global expansion, Rip Curl has remained a private company.
Australia Post boss Ahmed Fahour is Rip Curl chairman and owns 2 per cent of the company. He would make about $6 million if the business sold for more than $300 million. Francois Payot, a director and founder of Rip Curl Europe, owns 16 per cent of the company while the rest is held by other management.
“Rip Curl is an attractive brand, good business and its interesting timing given what’s happening with Billabong,” said one private equity source. “Great brands of the world are not built overnight. Australia, due its entrenched surf culture, has been able to take a strong position in the surf sector globally.”
Rip Curl is a single branded business compared with Billabong, which has a suite of brands.
An information flyer provided to possible buyers estimates Rip Curl’s sales at $400 million in sales in the 2012 financial year and earnings before interest, tax, depreciation and amortisation at $40 million. Current year forecasts stand at $47 million EBITDA.
( source The Australian Financial Review by Carrie LaFrenz)
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