BREAKINGVIEWS-Puma could run faster in Anta's pack

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

By Katrina Hamlin

HONG KONG, Dec 4 (Reuters Breakingviews) - China’s Anta Sports Products (2020.HK) could up the pace with Puma (PUMG.DE) . The $30 billion Hong Kong-listed sportswear giant is exploring a bid for the $3.5 billion German group, Reuters reported on Friday. Its 2019 deal with Amer Sports (AS.N) gives the idea credibility. Puma’s stock has fallen more than 50% this year. However, shareholders such as France’s Pinault family, which owns close to a third of the Big Cat, hope that new CEO and Adidas veteran Arthur Hoeld can reset by cutting costs and pursuing fast-growing direct-to-consumer sales. They won’t want to let it go on the cheap.

Its potential Chinese suitor could pay a premium. Anta’s net cash position will reach nearly $2 billion by year-end, per Visible Alpha. It might also partner with private equity on the deal, Reuters reported. Assume a successful prowler pays a 20% premium and that Puma’s operating profit is around $250 million in 2027, as per analyst forecasts. That means the buyer would get a return on capital below 3%, far less than the target’s 11% weighted average cost of capital. But Anta is building a track record of garnering more satisfying returns in the longer term. In 2019 it led a consortium of investors to purchase Amer Sports, owner of racquet maker Wilson, mountain sports specialist Salomon and the Suunto watch brand. Part of the rationale was that Anta could help Amer raise its game in China. That has played out: the Finland-based company’s sales there nearly tripled over the past two years, while its global adjusted operating margin has climbed to 21% from around 17% in 2021. Amer’s shares have powered ahead 176% since the company relisted in New York early last year - with Anta currently retaining a roughly 40% stake - while those of Nike (NKE.N) and Adidas (ADSGn.DE) have dropped. Its current $20 billion market capitalisation is roughly four times the valuation at the time of Anta’s investment. Puma would plug gaps in Anta’s portfolio, too. The Manchester City sponsor is big in football and running: its cutting-edge super shoes, which help athletes run more efficiently, now rival Nike’s Alphafly. It also boasts a strong lifestyle brand, including extensive archives accumulated since it was founded in 1948. All that represents a chance for Anta to find new ways to expand overseas while at home it faces slower economic growth and competition from compatriots like Li Ning (2331.HK) and newcomers such as Hoka.

Anta has ample motivation to muscle through a difficult deal. Follow Katrina Hamlin on Bluesky and LinkedIn.

CONTEXT NEWS

Chinese sportswear firms Anta Sports Products and Li Ning are among those exploring a potential takeover of German sportswear brand Puma, Reuters reported on November 28, citing a source. The two Chinese firms may team up with private equity funds for the potential takeover, according to the source.

Puma’s Frankfurt-listed shares closed up 18.9% on November 27, after Bloomberg first reported the news.

Amer Sports’ China sales growth has outpaced Puma’s in recent years

Amer Sports’ share have outpaced rivals since its US listing

(Editing by Antony Currie; Production by Aditya Srivastav)