Sea change as Rip Curl goes on the market for $500 million

Iconic Australian surfwear brand Rip Curl is up for sale with Bank of America Merrill Lynch confirming it is looking into a partial or full sale of the business.

The surf and ski wear business, based in Torquay, Victoria, is being put on the market by its owners, Doug ‘Claw’ Warbrick and Brian ‘Sing Ding’ Singer who founded Rip Curl in 1969.

SmartCompany understands Merrill Lynch is anticipating a sales price of between $480 million to $500 million on the basis of a price that is 10 times the last financial year’s earnings before tax of $48 million.

While Rip Curl is a private company, it is likely to have suffered a decline in profits similar to Billabong International, which is also on the market following approaches from private equity firms TPG and Bain Capital.

Although in a statement published today Rip Curl claimed its earnings before tax increased over the prior year “in contrast to general surf industry performance”.

A spokesperson for Rip Curl said the surfwear brand has identified a number of global opportunities which could “complement its organic growth”.

“We have also recently received unsolicited approaches from several international organisations which have indicated a desire to invest in our company,” the spokesperson said.

“In order to assess these opportunities, the board has appointed Merrill Lynch to assist Rip Curl in exploring the opportunities available as well as assessing the merits of introducing a third-party investor to the group.

“The board recognises that if any such investment were to occur it would need to be consistent with our objectives of ensuring our company values and brand values are respected, supporting our staff and being in the interests of our shareholders.”

Sources in the industry stress that any sale of Rip Curl will not be a distress sale but was prompted by the Billabong sale process, as Warbrick and Singer were fielding a lot of reverse enquiries.

The possible sale comes as Australia’s retail and wholesale surf brands have been hit by a downturn in consumer spending, competition from fast fashion brands, a move to offshore and online spending, as well as the increasingly high costs of producing apparel.

Brian Walker, chief executive at The Retail Doctor Group, told SmartCompany that Rip Curl’s revenue had been “increasingly eaten away” by the internet and fast fashion brands like Hollister.

“Their offer is largely undifferentiated in a market where a lot of product is being commoditised, the surfwear brands became general mass merchandise,” he says.

Walker says, on the positive side, Rip Curl is an “iconic Australian brand” and brand recognition is very high.

He believes Warbrick and Singer watched the Billabong process very closely and this led them to consider selling.

“I think the owners’ ages are a factor as well, I don’t see any great evidence of a huge succession plan there,” says Walker.

“These businesses are increasingly capital intensive with new technologies, new fit outs and new imaging; maybe they just feel ‘we’ve had a great run so it’s time to get out’.”

However, Walker questions whether now is a good time to sell Rip Curl, given the downturn in the surfwear market, and especially in light of Billabong’s experience.

“But perhaps they want to expand further into Asia; and a brand like that needs to re-energise and is going to take money as well.”