Salomon To Acquire Arc'Teryx

Finally confirming what will be remembered as perhaps the worst kept
secret in the history of outdoor industry acquisitions, Salomon today
officially announced the agreement to purchase Vancouver, Canada-based
Arc’Teryx has been signed. The deal is expected to be final in early
2002.

Arc’Teryx, which posted sales of approximately $30 million CAD in 2000,
will operate as a wholly owned subsidiary under the Salomon umbrella.
Salomon contributed approximately $578 million USD of total sales to
the adidas-Salomon coffer in 2000.

Though financial terms of the deal were not disclosed, Jayson Faulkner,
vice president international for Arc’Teryx told SNEWS® all shareholders
of Arc’Teryx, including REI, have agreed to sell their shares in the
company to Salomon as part of the agreement.

REI has owned approximately 20 percent of the company since 1999 when,
according to REI CEO Dennis Madsen, “Arc’Teryx needed capital to grow
the brand, and we decided to step forward and provide them with that.”

“We think a lot of the crew up there, and we’re happy to provide them
with that support, which was and remained purely financial,” added
Madsen.

According to Madsen, selling REI’s shares was a non-decision on several
fronts: One, Arc’Teryx had reached a point where it needed more capital
and, as part of that, new ownership. Two, it was the final step in
REI’s 18-month quest to shed involvement with outside manufacturing
subsidiaries (MSR, which sold to Cascade Designs) and focus on what it
does best — retail and e-tail.

As for Arc’Teryx’s founder and president, Jeremy Guard, he relinquishes
more than shares. Guard goes from owner to employee, and he will be
stepping down as president to focus his energies on design for the
company, something he’s told SNEWS® in the past is his real passion.
Other personnel changes are pending, and a new president has not yet
been named.

What Arc’Teryx, a company of 320 employees, gains in the sale is a
parent who actually thinks Arc’Teryx has under-spent on R&D and on
marketing, which Faulkner says was music to the company’s ears.

Arc’Teryx also gains a corporate Big Brother chock full of resources
and energy, ready and able to assist the company with systems to make
its shipping, data processing, and customer service operate more
efficiently, according to Faulkner.

Salomon won the hand of Arc’Teryx where others, including the likes of
Patagonia, The North Face, and Nike failed before, simply because
Arc’Teryx felt Salomon was of the bunch the most product-centric and
most passionate about developing innovation that changes markets. Well,
that and the fact that Salomon president Jean-Luc Diard and Guard
really clicked.

For its part, Salomon USA shared high fives around the office when the deal was finally announced yesterday.

“Arc’Teryx is awesome and the reference brand in apparel much like
TaylorMade is in golf,” says Troy Ballard, director of footwear and
apparel for Salomon USA. “Having them join our portfolio of best brands
now is a huge advantage for us as a company.”

SNEWS® View:
This is huge for Arc’Teryx. They now have access to resources before
unimaginable, including engineers who will likely enter the Vancouver
factory and begin automating some of the manufacturing process with
in-house-built machinery that can produce already exceptionally
manufactured gear with greater efficiency and, if you can believe it,
better quality.

Salomon now has access to
design ideas that they crave. While both brands will continue to
operate independently in the traditional adidas-Salomon fashion, don’t
expect for a minute that each company won’t share ideas and information
that will serve to improve the designs of existing and future product
offerings.

Expect new innovation and soon. Faulkner told us that Arc’Teryx can now
begin to implement some of the design ideas it had tabled for five
years or more. Can you spell t-e-n-t-s? We knew you could. Don’t be
surprised to see the company step up its design innovation efforts on
the Gore-Tex front on many levels either. Arc’Teryx is clearly proud of
its dominant position in the 3-layer Gore business where it enjoys a
50- to 65-percent share of that market, depending on with whom you
speak.

And, although Europe is not bowled over by this news SNEWS® has learned
— retailers who sell Arc’Teryx are afraid the small specialty brand
they have come to know and love will be adidas-ized — we would expect
those fears to subside quickly. Currently, Arc’Teryx sells 25 percent
of its line internationally and Faulkner expects that number to grow to
35 to 40 percent in the next several years. Europe accounts for
approximately 16 percent of the company’s overall sales now, and
Faulkner plans to grow that by strengthening Arc’Teryx’s position as a
company-distributed, specialty-oriented, product line.

Bottom line: Retailers won’t be seeing “Salomon by Arc’Teryx” labels
anytime soon, either in Europe or in any other country.