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What's next for Pon?

Published March 29, 2012

Editor's note: The following article appears in the March 15 issue of Bicycle Retailer & Industry News.

By Steve Frothingham

ALMERE, Netherlands—After acquiring the Dutch powerhouse Gazelle and Germany’s Derby group of brands last year, the Netherlands’ Pon Holdings completed the purchase of Canada’s Cervélo in February. The purchase gives the privately held conglomerate a wide portfolio of brands, and prompts the question: What will Pon buy next?

Accell, another Dutch company, has made no secret of its plan to acquire more bike brands, including some in North America. But Pon is playing its cards close to the vest, and a spokesman said the family-owned company does not make its executives available for media interviews.

But Cervélo co-founder Phil White said Pon, which does the majority of its business in autos—producing and selling parts and distributing Volkswagen, Audi, Skoda, Porsche and Lamborghini in the Netherlands—thinks the bike business has a big future.

“They sat down a couple years ago and said, ‘OK, what are the macroeconomic trends that the world is seeing? It’s getting older, there’s less fuel oil, there’s a move to green,’ ” said White.

“And they said, ‘How do we develop a long-term investment strategy that is going to be in sync with those global mega-trends?’ And they identified cycling as one of those areas.”

In February the company formed Pon Bicycle Group to oversee its bike operations. The unit is headed by Xeno Grimmelt, former managing director of Gazelle.
Pon likes to buy and hold companies and develop a portfolio of distinct brands, White said. Its current brands are strong in high-end road and triathlon (Cervélo), e-bikes (Derby) and the European city bike market (Gazelle). Derby’s Focus brand is a staple in Europe and is slowly entering the U.S. market, where it’s best-known for its high-end road and cyclocross models. The Pon bike catalog still appears to lack a strong high-end mountain bike brand, or much of a U.S. presence aside from Cervélo.

White said Pon is not looking to expand Cervélo much beyond its current brand position. “There’s going to be some growth to the product line, but it’s not going to be a wholesale change,” he said. “[Pon] bought the brand for what it is now and they don’t want it to change.”

Pon will help the Toronto-based company with financing, allowing it to deliver on pent-up demand: The brand regularly appears at the top of enthusiast surveys as “most desired,” but it has struggled to deliver on time. The brand’s dealer base is also still relatively undeveloped, White said, with regions in the U.S. and whole countries in Europe lacking dealers or distributors.

“Just replacing a very limited financing with a really good, solid, well-backed financing partner solves a lot of the challenges, and you just start to think about problems in a new way. Instead of saying, ‘We can’t do that,’ it’s ‘Well, how do we do that?’ ” White said.

Some dealers have been critical of Cervélo’s deep involvement with pro cycling, particularly its self-titled TestTeam, which raced the ProTour in 2009 and 2010 before merging with the U.S.-based Garmin squad prior to the 2011 season.

Cervélo will continue as a sponsor and supplier to the Garmin team for four or five years, White said, noting that Pon officials have encouraged him to retain its presence at the top of the sport.

White said he and Cervélo’s engineering staff will remain in Toronto. The company will explore ways it can consolidate functions in North America and Europe. For example, Cervélo might share warehousing with other Pon brands in Europe and could perhaps share some sales functions with Focus in North America.

But in general, he expects Pon to allow Cervélo to manage itself as long as it preserves its brand position. The only question is: What other brands might Pon bring to the stable?

Topics associated with this article: From the Magazine, Mergers/Acquisitions

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