Global luggage products maker Samsonite International has agreed to acquire luxury luggage rival Tumi for around $1.8 billion in an all-cash transaction, according to a press release.
The acquisition will help Samsonite strengthen its higher-end business.
Luxembourg-based Samsonite said it would pay $26.74 per share, a 38 per cent premium on the volume-weighted average price of Tumi's stock price for the five days up to March 2. This represents 13.6 times enterprise value to Tumi's adjusted EBITDA for the last 12 months ended December 31, 2015.
The deal is expected to bring cost savings in sourcing, logistics, sales and marketing, as well as distribution and product development.
Samsonite is listed in Hong Kong and premium rival Tumi is currently traded in New York. The new company will list in Hong Kong.
“This is a transformational acquisition for Samsonite. It will expand our presence in the premium segment of the global business bags, travel luggage and accessories market," Samsonite chief executive Ramesh Tainwala said in a statement.
“We will expand Tumi's presence in Asia and Europe, while strengthening its business in North America, by leveraging our expertise in global distribution, sourcing, product design and technical innovation, especially in the area of lightweight hardside luggage,” he added.
Tumi has about 2,000 distribution points across 75 countries, and the firm saw net sales increase by 4 per cent year-on-year in 2015 to $548 million. North America accounted for 68 per cent of those sales, while Asia Pacific accounting for 17 per cent.
For the first six months of 2015, Samsonite's global net sales was $1.2 billion. The deal is expected to be closed in the second half of 2016, subject to regulatory and shareholder approvals.
Samsonite was founded in Colorado as a trunk manufacturing company. In 2012, Samsonite had acquired High Sierra and Hartmann brands, while in 2014 it bought Speck.
In India, Samsonite is the second-largest player with a strong market share followed by Safari, a distant third. Safari and VIP are both public listed firms. The India luggage market, dominated by unorganised segment, is growing at a rapid pace with VIP being the market leader.
Morgan Stanley was the sole financial adviser to Samsonite, while Cleary Gottlieb Steen & Hamilton; Ropes & Gray; and Freshfields Bruckhaus Deringer acted as its legal counsel. Goldman Sachs; and Skadden, Arps, Slate, Meagher & Flom worked with Tumi.