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NEW YORK — Shares of Quiksilver Inc. tumbled more than 10 percent Tuesday on the New York Stock Exchange after the surf apparel company confirmed it would acquire Rossignol Group SA, the ski and snowboard manufacturer.
The stock, which dropped $3.46 to close at $29.74, got hit because Quiksilver is taking a gamble in the ski arena, where growth has slowed in recent years, analysts and industry executives said.
Overall sales at specialty ski and snowboard shops fell 6.6 percent in unit terms and 2 percent in dollar terms to $1.37 billion for the period of August to January, according to the SnowSports Industries America trade firm.
“The single greatest challenge for Quiksilver management will be the volatility and seasonality of the global ski and snowboard hardlines business,” Jeffrey Klinefelter of Piper Jaffray & Co. wrote in a research note. “The ski and snowboard hardlines business has been growing slowly over the last few years, and at this point, we have no visibility for the trend to change.”
Klinefelter said another challenge will be managing the significant exposure the combined entity will face with respect to the euro and other currencies.
Robert B. McKnight Jr., Quiksilver’s chairman, attributed the share slide to hesitation about the pace of growth in the ski industry. He said he has confidence in the Rossignol business.
“Rossignol has been around for 100 years and we see it as a long-term opportunity,” he said in an interview.
The acquisition has been expected and came to fruition Tuesday when the Huntington, Calif.-based firm said it would buy the French ski giant for $320 million in cash and stock. McKnight said the move is the next step in Quiksilver’s evolution as an outdoor sports lifestyle company.
“We see a lot of growth for Rossignol in other categories, and the price was right,” McKnight said.
Quiksilver plans to build up the soft-goods arena for Rossignol, significantly increase its men’s and women’s outerwear business and eventually introduce technical mountainwear with some of the other Rossignol brands.
Brian Rowe, partner and managing director of investment bank Sage Group, said, “Rossignol is a hard-goods brand heavily winter-focused and Quiksilver is a summer-focused soft-goods label. The acquisition will also give Rossignol an injection of youthfulness and vibrancy.”
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Quiksilver, which had revenues of $1.27 billion last year, owns the Roxy junior brand and 12 other labels and has been rapidly opening stores. Last year, it bought DC Shoes, a maker of skateboarding footwear and apparel.
Rossignol, based in Voiron, France, had sales of about $625 million in 2004. It owns the winter sports brands Dynastar, Lange and Look, as well as the Cleveland Golf label. The division will stay based in Voiron, McKnight said. Rossignol was founded in 1907 and for the last 50 years has been under the direction of its current chairman, Laurent Boix-Vives, who has built the group through acquisitions and new ski technologies.
Boix-Vives will continue to have a “key advisory role” with Quiksilver and Cleveland Golf. The Boix-Vives family, which owns an estimated 45 percent of Rossignol and holds 63 percent of its voting rights, will retain a portion of its direct ownership, about 35 percent, in Cleveland Gold, for at least 4 1/2 years. Boix-Vive’s majority holding will be paid 70 percent in cash and 30 percent in Quiksilver shares, and minority shareholders will be bought out at 19 euros ($25.50) a share, for 100 percent in cash, Quiksilver said.