Schwinn/GT Europe Ltd. was not part of the package bought by Pacific Cycles and Direct Focus Inc. in a bankruptcy court auction for $151 million on Wednesday.
Under the purchase agreement, Pacific will control Schwinn’s bicycle assets and Direct Focus will get Schwinn’s fitness equipment line.
The UK and European distribution rights for Schwinn/GT may be picked up by Hot Wheels International, importers of Mongoose bikes. Mongoose is a Pacific-owned brand
U.S. Bankruptcy Judge Sidney Brooks had approved an $86 million bid from Pacific on Tuesday for Schwinn’s bicycle division, but Pacific abandoned that bid to make the joint offer with Direct Focus.
Schwinn is the ‘Raleigh’ of America and the fact Pacific will place in the mass market channel is putting the heeby jeebies up many US IBDs.
“Moving to the mass market will likely mean Schwinn bikes will sell far more cheaply than they do now. Independent bike dealers say that will be followed by a significant reduction in quality, but buyers may not know the difference,” said a report from Associated Press of America.
Richard Wittenberg, Pacific vice president of sales and marketing, told AP that Schwinn would likely move into mass market outlets such as Wal-Mart in the second half of 2002.
“Certainly when one pays that sum of money for the brand one needs to get a return on that brand, and we don’t necessarily know how to do that without going to the mass market,” Wittenberg said.
Huffy president Don Graber was in a huff over the Pacific win. He said he believed the final price exceeded the value of the Schwinn name or the company’s assets. Huffy had been the first bidder for the bankrupt Schwinn/GT and thought to be the likeliest winner.
Schwinn/GT Europe Ltd, the company which was the first to go pop, setting alarm bells ringing in the Far East, where Schwinn/GT owed millions of dollars, is still in receivership and is still being offered as a going concern by receivers Kroll Buchler Phillips of London.
Offers had been made for the company but the best of these faltered because of the complex license agreements between Schwinn/GT Europe Ltd. and Schwinn/GT Corporation of America.
Halfords is taking a close interest in the Pacific buy-out. Kroll Buchler and Phillips has enabled Halfords to continue selling GT bikes – many containers full of GT bikes were impounded on docks when Schwinn/GT Europe Ltd. went into receivership – but the Redditch-based retailer is keen to see the brand up on its feet again with a pukka UK distributor.
Bikebiz.co.uk has calls out to Hot Wheels and Lee Manning, the official receiver in charge of Schwinn/GT Europe Ltd, and will report on the latest news as soon as possible.