Pacific today won its auction tussle with Huffy and is the new owner of Schwinn/GT.
The Denver Chapter 11 court reconvened this morning after yesterday's bids and counter bids from Huffy and Pacific (a tussle reported 'live' on a Yahoo.com message board by an investor with a laptop). After quickly accepting the Pacific bid, the judge called for an evacuation of the courthouse as government buildings across the US did likewise due to the terrorist attacks on New York and Washington DC. The 70 attorneys working on the case duly filed out.
The fight between Pacific and Huffy was monitored closely by Russell Merry of Hot Wheels. He told bikebiz.co.uk:
"Hot Wheels has been in discussion with Pacific/Mongoose as to the implications for the UK market should Schwinn/GT come under their ownership. We are optimistic that these plans will lead to opportunities for Hot Wheels. There is obviously no incumbent UK distributor. We should also say that we do not expect to have immediate information in the light of events in the USA today."
Schwinn/GT Corp. said today that following a "spirited" auction, judge Sidney Brooks of the Denver, Colorado, bankruptcy court had approved Pacific Cycle's $86 million cash bid to acquire the company's cycling division.
It's a joint bid with fitness equipment supplier, Direct Focus.
"We are very gratified by the outcome," said Jeff Sinclair, Schwinn/GT's Chief Executive Officer.
"The winning bid reflects positively on the quality of the brand and the efforts of our fine group of employees. We intend to cooperate in every way to ensure as smooth a transition as possible to Pacific Cycling."
Could this be the same Jeff Sinclair who helped Pacific's opponent most vigorously in its campaign to own Schwinn/GT? Huffy's stalking horse bid was clearly the one preferred by Schwinn/GT execs.
Chris Hornung, Pacific Cycle's CEO said: "This is a landmark day for Pacific and for Schwinn/GT dealers. The Schwinn name is an American icon. It is the brand that many Americans grew up with and aspired to own. We feel that we offer the best opportunity in a generation to restore vitality to the Schwinn brand."
Pacific plans to bring "new life" to Schwinn/GT, said Hornung.
"One of the biggest benefits of the brand is the strong dealer network. While it's extremely unfortunate that the bankruptcy process resulted in the dissolving of dealer agreements, it's our intention to quickly restore the network of independent Schwinn and GT dealers. We also plan to immediately establish clear and open communication, and hope to begin meeting with a group of [US] dealers this week."
Hornung said that the company will immediately begin re-establishing the flow of 2002 model year product of both Schwinn and GT bicycles from Asia. Financial constraints prevented the former company from receiving shipments since spring of this year.
Pacific will also begin working closely with existing Schwinn dealers, both through focus groups and through the establishment of a dealer advisory council to understand and serve their needs. Specific programs will be unveiled later this month at the Interbike trade show in Las Vegas.
Anticipating IBD's concerns of possible expansion of Schwinn distribution to big box retail outlets such as Wal-Mart, Hornung said: "While we are considering our options, the earliest we would introduce Schwinn to mass retail would be fall 2002. We want to speak with dealers to determine how we can best support them using our high-volume, efficient business model.
"We are dedicated to maintaining the Schwinn dealer network, brand essence and positioning, which is embodied in quality, value and family recreation.''
Hornung also said the company will continue to support the GT brand while it evaluates a long-term strategy.
The acquisition of Schwinn/GT brings to a close a decade of uncertainty in the brand's history. Schwinn entered Chapter 11 bankruptcy in 1992, and the Schwinn family sold the company to Scott Sports Group in 1993. In 1997, Schwinn was sold to Questor Partners. The company entered Chapter 11 again in July of this year.
In a press release, Don Graber, Chairman, CEO and President of Huffy Corporation said: "While we are disappointed that we will not be able to add the Schwinn/GT brands to our current brand portfolio, I would like to thank all of the employees of Schwinn/GT for their dedication during an extremely trying time and for their assistance during the sale process. Unfortunately, the levels of bids reached a point at which Huffy Corporation believes that the price exceeded the value of the assets and trademarks. While we remain confident that our business model for the integration of the Schwinn/GT would have ultimately been very successful, the current economic environment simply will not allow for significant overpayment in a business that has proven to be very difficult over the past three years."