A Short History of Schwinn 2021: Dutch Company to Purchase Schwinn Brand - Doug Barnes

Sunday, October 17, 2021

A Short History of Schwinn 2021: Dutch Company to Purchase Schwinn Brand

 
 
Schwinn Bicycles will soon have a new owner. 

In October 2021, Pon Holdings of the Netherlands has approved the purchase of the brands Schwinn, Cannondale, GT, and Mongoose from Durel Industries for $810 million. Schwinn will join other brands already owned by Pon Holdings that include Gazelle, Cervélo, FOCUS, Santa Cruz, Kalkhoff, and Faraday.

Pon currently is one of the top 5 players in the bicycle industry. About 75% of people in the Netherlands have a bicycle made by Pons. The combined worth of the new bicycle business is valued at $2.9 billion. The fit of Schwinn and the other purchased brands is that Pon’s high-end bicycles will be complemented by more affordable mass-market bikes. 

In the Twentieth Century, Schwinn Bicycles had come full circle from its beginnings. Starting in the 1890s, Arnold, Schwinn and Company were a bicycle manufacturer with none of its own retail sales outlets. Their bicycles were sold in Sears and Roebucks and other department stores.  This changed in the 1930s as Schwinn began to withdraw from selling bicycles through mass-market retailers. Schwinn developed high-cost, high-quality bicycles and started focusing on the sale of its bicycles through local bicycle retailers.  In the 1950s, Schwinn was selling their bicycles almost exclusively through their own “Schwinn Approved” stores.  During the bicycle boom in the early 1970s, Schwinn was selling over 1 million bicycles annually.

After a series of 1980s missteps in part caused by the globalization of the bicycle industry, the Schwinn Family Business filed for bankruptcy in 1992. The company was purchased by a venture capitalist firm named Zinn-Chilmark in 1992. The venture capitalists knew nothing about running a bicycle business and in 1997 sold Schwinn to Questor Partners Fund. This financial firm proved equally incompetent in running Schwinn and Schwinn again declared for bankruptcy in 2001.

The Schwinn brand finally found a good home. In 2001, Schwinn was purchased out of bankruptcy by a more bicycle-savvy company called Pacific Cycles. Pacific Cycle was purchased and became a part of Dorel Industries in 2004.  Dorel focused on reviving the Schwinn name in 2010. Under Durel Sports, the iconic Schwinn brand was transformed into a bicycle company that sells low-cost models in big-box stores such as Walmart, Target, and Kohl's. This strategy was quite successful despite  Schwinn's history of antipathy towards such large retailers.

Walmart Add for Schwinn Bicycle, 2021
(Image: Walmart Website)
The old Schwinn emphasis on high-quality bicycles sold at premium prices yielded to selling lower-end mass-market bicycles. Along with other bicycle producers and retailers, the Durel subdivision Pacific Cycles responded to the high demand during the Coronavirus pandemic by increasing its emphasis on online sales. 

CNBC recently summarized the current state of bicycle sales in the USA and has the following observation on Schwinn. CNBC quotes Ray Keener, an industry veteran and editor of Bicycle Retailer as saying,

Schwinn has been No. 1 in all the brand surveys I’ve seen going back 40 years. While their bikes are lower in quality and price than when they were selling through bike shops [in their heyday], Schwinn’s mass-retail models have slowly gotten better over the years. So if consumers want bikes for under $300 or so, the demand is there.

Now a new chapter begins with the sale of the Schwinn brand to Pon Holdings, a manufacturer of high-quality bicycles. The press release from Pon Holdings emphasizes that Schwinn is one of the major known brands of bicycles in the USA.  The fate of the Schwinn brand is still unknown, but being part of a larger company with deep pockets may lead to innovation and perhaps even to upgrading their offered bicycles.

The Netherlands is one of the leading bicycling countries in the world. The Schwinn name might have found a good home in the Netherlands. Only time will tell whether or not that the iconic Swhinn brand is now in good hands. The fate of Schwinn is now entrusted to a Dutch company. 

2021 Pon Bicycle Brands (Before Purchase of Durel Sports)
(Image: Pon Website)

Press Release from Pon Holdings October 11, 2021

The combination of Pon. Bike and Dorel Sports creates a bicycle company with the strongest portfolio of iconic and quality brands. Dorel Sports (1.2 billion US dollar revenue) owns the worldwide renowned brand Cannondale, with a complete range of premium bike models for all types of riders, including a strong e-portfolio. 

The American Original brand Schwinn is the number 1 in awareness in the United States, with a heritage of 125 years… With the acquisition of Dorel Sports, Pon Bike not only reaches a worldwide leading position but also further improves its broad portfolio of bicycle brands. Moreover, it means a breakthrough in the United States, with millions of consumers and a rich offer of bikes in all categories (Urban, Trekking, MTB, Road). Already 20% of Dorel Sports revenues are generated online. 

This rich knowledge and innovation contribute to all bike lovers in the world, especially in a time when cycling, dealers, and bicycle companies can provide tangible solutions for mobility, health and sustainability challenges that consumers, governments, and companies face. (Slightly revised and shortened from the original press release.)

Press Release Dorel Industries

Dorel Industries Inc. (TSX: DII.B, DII.A) today announced that it has entered into a definitive agreement to sell Dorel Sports, its bicycle segment, to Pon Holdings B.V., a Dutch mobility group, for US $810 million in cash, representing approximately CAD $1 billion, payable to Dorel at closing. The sale of Dorel Sports is expected to close before the end of the first quarter of 2022.  Dorel intends to announce specific details regarding the use of the net proceeds from the sale at the time of closing.

 Martin Schwartz, Dorel's President and CEO, made the following observations about the sale of its bicycle division.

Acting on feedback from our shareholders, Dorel embarked on a thorough review of strategic alternatives earlier this year. Our objective has consistently been to create value for our shareholders. The divestiture of Dorel Sports represents a unique opportunity to unlock value by capitalizing on strong demand for scaled assets in the bicycle segment,” “While making the decision to sell Dorel Sports has been difficult, we are confident that this transaction represents full value for Dorel shareholders. (slightly reworded)

The agreement to sell Dorel Sports marks an exciting new chapter for Dorel. Dorel believes that the sale of Dorel Sports will strengthen Dorel’s balance sheet, allow Dorel to focus on generating profits from its remaining businesses, substantially accelerate Dorel’s ability to deleverage the business, and position Dorel to grow its Home and Juvenile businesses both organically and through value-accretive tuck-in acquisitions. (Slightly revised and shortened from the original press release)

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