KMD Brands says Rip Curl demerger proposal from US-based Stokehouse delivers ‘no value’ for investors

Shares in KMD Brands closed higher after it rejected a proposal from a US surfwear company to demerge its Rip Curl business, saying the move would create no value for investors. Stokehouse Unlimited proposed KMD Brands — also behind outdoor clothing brand Kathmandu and hiking boots label Oboz — spin Rip Curl into a separate NZX and ASX-listed company and merge it with the California-based business. Stokehouse, led by former Billabong US chief Paul Naude, already owns surf labels Vissla and Sisstrevolution. On Tuesday, KMD told investors it had received and considered Stokehouse’s proposal, which would leave the company owning 22 per cent of the merged entity. KMD shares closed 3.2 per cent higher at 16¢ but is down 33 per cent so far this year. KMD chair David Kirk said the concept proposed by Stokehouse created “no value for shareholders and is challenging from an execution standpoint”. “In addition, the combination of multiple surf brands that directly compete with each other is not a strategy that has proven effective,” Mr Kirk said, adding KMD would continue with its own strategy — dubbed Next Level — set to save the company at least $25 million. KMD also noted Stokehouse had limited scale and profitability and had “significant debt” relative to its earnings profile. In a trading update earlier this year, KMD said Rip Curl sales grew 5.6 per cent in the five months to December. That compared with Kathmandu’s near-13 per cent jump. KMD is set to release half-year results on Wednesday.