GIVISIEZ, Switzerland (BRAIN) — Industry veteran Beat Zaugg, who has been an owner of Scott Sports since 1998, says he remains the brand's CEO, a minority shareholder and chairman of its parent company board, despite a news release Friday saying that the board had fired him.
"This announcement was made to destabilize the company and its employees," Zaugg told BRAIN on Monday; he said the announcement had been made via a PR agency that works for Scott's majority shareholder — Korea's Youngone — not Scott Sports.
He said the dispute arose from a “culture clash” between Youngone and the company.
Related Articles
- August 2024: Scott ends search for new CEO with appointment of co-CEOs
- April 4, 2024: Police called to Scotts Sports headquarters
- March 29, 2024: Scott replaces CEO to 'refresh' brand
However, the PR firm responded to BRAIN later on Monday with a statement from the Scott Corporation board insisting that Youngone representatives have a majority on the board and had voted to terminate Zaugg.
"We understand that it may be difficult for Mr. Zaugg to accept his termination (given his long-standing role as CEO). But this is ultimately irrelevant as a matter of law: the ultimate decision body of a company is the board of directors and the board is clearly entitled to terminate the employment with the CEO," the statement read in part.
The statement said that a majority of the board "have resolved to terminate Mr. Zaugg as CEO with immediate effect and that termination has been duly notified to Mr. Zaugg last week. As you will understand the reasons that led to this termination cannot be disclosed at this stage."
Youngone is a supplier to brands including Patagonia, adidas, Lululemon, Outdoor Research, and The North Face, with factories in Korea, Bangladesh, China, Vietnam, and Thailand. It also is a majority owner of the outdoor apparel brand Outdoor Research.
The release last week said Zaugg is being replaced by Juwon Kim a Scott Corporation board member since 2022 and Youngone’s head of growth strategy and mergers and acquisitions.
According to the release, Kim is being advised by Steve Meineke (a former president of Specialized USA, Accell Group and Keen, and an Outdoor Research board member) and Mathias Seidler (a former CEO of Derby Cycle AG).
Zaugg conceded that Youngone controls a majority of the board, but said the board did not terminate him correctly. “So far they did it wrong,” he told BRAIN, without elaborating. “This has to be my secret for the time being,” he said.
Background
Ed Scott founded Scott Sports as a ski industry supplier in 1958 in Sun Valley, Idaho. The brand later entered the motocross and bicycle markets. In 1993 the company sold 55% of its shares to Zell Chillmark Chicago’s Investment Fund (the fund had acquired Schwinn the previous year). In 1998 Zaugg was part of a management buyout of Scott with then-chairman Tom Stendhal and other managers. In 2002 Zaugg acquired a majority of the company and in 2005 he acquired 100% of it, according to a company history.
Youngone acquired a 20% share in Scott in 2013 and expanded it to 50.01% in 2015, taking over the majority position from Zaugg. In December last year Youngone loaned Scott 150 million Swiss francs ($176 million) in a loan that matures at the end of 2024.
Zaugg told BRAIN that Scott is facing challenges similar to those of other major brands. “Like everyone else we have too much inventory, although we are doing a little better than most in Europe,” he said.
He said the 150 million franc loan last year was necessary because Youngone had “destroyed our banking relationships.”
“(Youngone) prefer we are on their infusion … although we had other ways to finance (that) they didn’t let happen. They are always saying ‘We have been so helpful.’”
He said he would be communicating with the board on Tuesday.
