Rapha’s owners are looking to appoint an investment bank to handle a prospective sale of the upmarket cycle clothing business founded by Simon Mottram and others in 2004, reports Sky News.
The business is currently backed by Active Private Equity, which has already successfully exited its investment in one cycling business, Evans Cycles, in a £100 million deal in 2015.
Sky News says that it is not known what valuation would be put on Rapha, nor how strong the chances are that a deal would actually take place. Neither the company nor Active Private Equity would comment.
In November last year, it seemed that Rapha was set to be acquired by L Catterton, the private equity firm 40 per cent owned by luxury goods powerhouse LVMH.
In December, the investment firm bought a controlling stake in the Italian bike brand, Pinarello, but things have gone quiet on the rumoured Rapha deal.
According to Leanluxe, which provides “Intelligence, analysis, and opinion on the world of modern luxury business,” the hold-up is likely to be due to problems associated with future control of the business.
It says that some shareholders in Rapha – whether part of the business at the start and no longer active, or former executives who have shares – are unwilling to give up their shareholdings and control.
They are reported to be looking for “a less intrusive process,” something that is unlikely to happen in the case of an LVMH-backed deal says the website, with the luxury goods firm tending to install its own management at the smaller businesses it acquires.
Leanluxe has also pointed out that Rapha is unusual for a business operating at the high end of the consumer goods market in that its margins are unusually slim – 2.25 per cent, based on pre-tax profit of £1.1 million on turnover of £48.8 million in 2015/16.
It believes that is due to growth in employee numbers, which grew six-fold to 306 since 2013, with payroll costs trebling, the expansion of the Rapha Cycle Club concept, which had 14 stores at the year-end, and manufacturing costs, which alone gobble up half the company’s turnover.
While L Catterton may be out of the picture, a potential sale to a financial investor is still a distinct possibility and whichever investment bank is appointed to explore Rapha’s options would identify private equity firms and others that might look to back the business during its next stage of growth.
As for potential trade buyers of Rapha?
Leanluxe mentions two businesses – one the Vancouver-based yogawear business Lululemon, which had turnover of $2.1 billion in 2015/16, the other the US-based sportswear firm Under Armour, which had turnover of $4 billion during the same period.
Under Armour now supplies the off-bike wear for Team Sky staff and riders, who from 2013-16 had worn Rapha, who also provided the team’s racing kit.
Rapha continues to act as clothing sponsor for UCI Women’s team Canyon-SRAM, whose roots lie in the former T-Mobile team which raced from 2012-14 as Specialized-Lululemon.
Born in Scotland, Simon moved to London aged seven and now lives in the Oxfordshire Cotswolds with his miniature schnauzer, Elodie. He fell in love with cycling one Saturday morning in 1994 while living in Italy when Milan-San Remo went past his front door. A daily cycle commuter in London back before riding to work started to boom, he's been news editor at road.cc since 2009. Handily for work, he speaks French and Italian. He doesn't get to ride his Colnago as often as he'd like, and freely admits he's much more adept at cooking than fettling with bikes.