South Korean retail firm E-Land World said on May 3 it has signed a stock purchase agreement with Xtep International Holdings to sell its subsidiary K-Swiss for 300 billion won ($260 million).
The deal is expected to close in August.
“Through this win-win deal, E-Land can strengthen its finances while Xtep can gain a new growth engine,” said E-Land CFO Lee Yoon-joo.
E-Land’s debt-equity ratio stood at 172 percent as of last year and it plans to lower it to 150 percent. Incidentally, E-Land and Xtep have also agreed to set up a joint venture of boots brand Palladium to spur the brand’s growth in China. E-Land will hold 51 percent stake while the Hong Kong-listed firm will own 49 percent.
The Korean retailer bought acquired US shoe brand K-Swiss for $170 million won in 2013. At the time K-Swiss was making losses due to aggressive business expansion. In 2009, K-Swiss bought Palladium Boots, a French shoemaker.
After purchasing the US shoemaker, E-Land carried out a restructuring of the company and closed down loss-making stores, turning it around in the first year of the buyout.
But K-Swiss started making a loss again in 2015 until it turned around in 2018 with 110 million won net profit. The net loss stood at 49.8 billion won in 2016 and 42.7 billion won in 2017.
XTep was founded in 2002 and got listed on the Hong Kong Stock Exchange in March 2008. The company with 6,230 stores around China recorded revenue of 6.38 billion yuan ($950 million) and operating profit of 1.04 billion yuan in 2018.
It competes with China’s other local sports brands such as Anta, Lining and 361° and is gearing up for global expansion.
By Park Ga-young (firstname.lastname@example.org)