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Reebok buys Canadian Hockey Equipment Company
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Old 08 Apr 2004, 11:19 PM   #1 (permalink)
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Default Reebok buys Canadian Hockey Equipment Company

Reebok paying $436M Canadian hockey equipment company


MONTREAL (CP) -- The Hockey Co., a Canadian sports equipment maker whose roots go back to 1899, will be taken over by multinational Reebok International Ltd. in a deal that should make its investors happy.

Reebok is offering a fat premium for Hockey Co., the world's leading maker of hockey wear and equipment with its CCM, Jofa and Koho brands, in a deal valued at $436 million Cdn.

A Reebok executive said Thursday the Montreal-based company's big attraction is its exclusive contract until 2015 to supply jerseys for all 30 National Hockey League teams and a similar deal with the American Hockey League.

Hockey Co. also has 30 per cent of the worldwide market share for hockey wear and equipment.

John Frascotti, senior vice-president for new business at Reebok, said the NHL contract will dovetail with Reebok's supply contracts with the National Football League, the National Basketball Association and the Canadian Football League.

"We think there's a lot of opportunity for our two companies to work together," Frascotti said in an interview.

Hockey Co.'s origins go back to 1899 with one-time bicycle maker Canadian Cycle and Motor Co. (CCM), which became a dominant name in Canadian sports equipment but fell into bankruptcy in 1995. It was resurrected by creditors and Hockey Co. made an initial public stock offering in June 2003 at $16 a share.

Its leading investors, including Wellspring Capital Management, who together own 41 per cent of the shares, have agreed to Reebok's offer of $21.25 Cdn a share in cash, or $204 million US, plus $125 million US of assumed debt.

Paul Fireman, chairman and CEO of Reebok International, headquartered in Canton, Mass., said hockey is one of the world's fastest-growing participatory sports.

Hockey Co.'s leading market position with elite athletes "will enable Reebok to expand its reach to young athletes," Fireman added.

Matt O'Toole, chief executive at Hockey Co., said the company was not expecting to be sold when it regrouped and made its initial share offering less than a year ago, but he said the investors are happy with the opportunity.

"You don't plan to attract a strategic acquirer, but the company has been so successful that I guess we sit pretty closely to what Reebok was looking for," the CEO said in an interview.

Hockey Co. had a 2003 profit of $18.6 million Cdn on sales of $239.9 million.

Reebok expects Hockey Co. to add to Reebok earnings this year, depending on the outcome of the NHL's current labour negotiations, which some believe could lead to a players strike in the 2004-2005 season.

Frascotti said Reebok was aware of the possibility of a strike. "It didn't dampen our enthusiasm at all," Frascotti said in an interview.

"Despite the negotiations going on now we have confidence in the sport and the league and the players; we take a long term view on these things."

Reebok has annual sales of $3.5 billion US. Its brands include Reebok, Rockport and Greg Norman and Polo Ralph Lauren footwear.

Analyst Hugues Bourgeois of National Bank Financial said the offer is fair for Hockey Co. investors. He said it should be good for Reebok as well since the American company produces apparel and footwear but not sports equipment.

"I think it's a good fit from that perspective."

Bourgeois said the worldwide hockey equipment market is worth about $680 million US a year. While the market has little growth, Bourgeois said Hockey Co. has been able to stimulate the market by developing new products.

Hockey Co. shares (TSX:HCY) shot up 23 per cent, or $3.91, to $21.11.

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