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We take a look at how the WiggleCRC administration process is going, and where we may be headed.
Followers of industry news will recall that the administration process of WiggleCRC was triggered when its parent company SIGNA Sports withdrew a €150m funding commitment.
On entering administration, the Administrators prepare reports which look at the assets and liabilities for the business, as well as looking for potential buyers to take on the business, or part of it. There are four separate companies in the UK that were part of SIGNA Sports: Chain Reaction Cycles Ltd, Chain Reaction Cycles Retail Ltd, Hotlines Europe, and Wiggle Ltd. These all fall under a group known as ‘Mapil Midco 1 Ltd’. In practical terms, Hotlines is the distribution company acting as the intermediary between brands and shops, CRC is the behemoth that buys products straight from the factories before they hit the CRC Retail Ltd and Wiggle Ltd websites/public facing part of the enterprise. The Administrator’s reports have been prepared for Wiggle, as well as Chain Reaction Cycles, Chain Reaction Retail, and distributor Hotlines. So far only the Wiggle report is online, but we’ve been sent a copy of the others. Although it’s all one ‘group’, the companies are based in different UK territories, meaning there are separate reports for different parts of the business. Altogether, it makes for some interesting reading – and an opportunity for some speculation as to what the future might hold.
The first figure that caught our eye is that there are only four entities with whom there is still ongoing discussion about monies owed. 89 ‘retention of title’ submissions were received – this is where a company or person tells the administrator that it believes it is entitled to monies, usually in respect of goods. The Administrators then reach an agreement with those entities – perhaps they hand back the goods, or they agree a payment plan with the entity. In this case, it appears that as of 20th December when the report was produced, 85 agreements had been reached, leaving just four remaining. This would appear to be a positive sign for the wider bike industry: if just four agreements remain to be reached, it seems likely that the other entities have had their financial exposure limited. Hopefully that means that fewer distributors will be subject to any significant losses as a result of the administration.
The next figures to catch our eye around around the potential purchase of the business. 24 Non-Disclosure Agreements were signed – although there are likely to be a few people just having a look out of nosiness. This led to seven parties meeting with the management team on at least one occasion, with interested parties due to submit funded offers by 4th December.
It seems likely that there were, then, seven parties with a serious interest in buying the business – or some part of it.
So who would want to buy such a thing, and what would it take?
The simplest option would be for someone to buy the whole group, plug that €150m gap, and continue to the run the business along similar lines as previously: big buying clout with factories, big internet presence, and a distribution network that can cater to shops and individual shoppers. Who has that kind of money, or a business it might make sense to augment with this?
The alternative would be some sort of break up of the business, with someone looking to buy one or more of the subsidiaries but not all of it. But if you look at the constituent parts, CRC Retail has relatively small margins – the profits are in the WiggleCRC element, with its massive buying capacity and links to factories. The Hotlines distribution function is also relatively small, and we know that trading is tough in the UK for bike industry distributors – as an investment, it’s hard to see who might want this capacity separately from the bigger WiggleCRC business.
The obvious name that’s doing the rounds on the rumour mill is Mike Ashley’s Frasers Group, which already owns Evans Cycles. This group has something of a reputation for buying up companies in administration, and the WiggleCRC group could complement the Evans purchase by increasing their online capacity and improving direct purchasing power from factories. However, this would be a shift in focus away from its traditional high street territory.
Another company in the right market and with the size to play at this level is Pentland Group, the majority stakeholder of JD Sports, which includes GoOutdoors, Blacks, Millets and more, and the owners of many well known brands, including Endura. Recent acquisitions by this privately owned company have been more brand rather than retailer orientated, although since WiggleCRC owns the brands Vitus, Ragley and Nukeproof, perhaps this wouldn’t be such a shift.
The other big player in the cycle market who might have funds of this kind is Halfords, which also owns Tredz. Although profits were down considerably last year, if the company had the money it would allow Halfords to offer a stronger range of bike brands, increase the online retail presence of Tredz, and potentially give the company another route via Hotlines into working with local bike shops – it already operates a form of co-existence through cycle to work scheme vouchers. It doesn’t take a great stretch of the imagination to see how Halfords could augment its value offering with bikes from Vitus and Ragley, while Tredz could up its race credentials with Nukeproof.
That gives us three companies we think might have the clout to at least make it to those meetings with the management team. So, on the basis that there were seven, who else might there be?
The Walmart group is already invested in cycling, with its purchase of Rapha being the headline there. However, that doesn’t seem to be turning into a major profit line, so we’re not convinced the company would be looking to make a purchase of this magnitude right now.
Thinking about it from the perspective of ‘online retailer’ rather than ‘cycling business’, as a bit of a wildcard, how about the ASOS major stakeholder Anders Polvsen? With fast fashion becoming less fashionable, putting your online retail skills into something perceived as green might not be a bad move. And he’s already the UK’s largest private landowner, noted for his rewilding plans in Scotland – making him well positioned to create demand for bikes by offering places to ride them…
Who else do you think might have the assets and business interest in taking on WiggleCRC into the future? With the deadline for bids set for 4th December, it seems likely that the administrators are already doing due diligence on a proposal, and before long we should know what the future looks like. Let’s hope it’s bright, and with a focus on bums on bikes.