An article on a Bell merger
from Bicycle Retailer & Industry News
March 15, 1995
Summary: In 1995 Bell merged with American Recreation, acquiring the Blackburn, VistaLite, Rhode Gear and Advent brands among others. It represents one of the more significant expansions of Bell's corporate reach.
Bell Sports Emerges as Powerhouse
BY STEVE FROTHINGHAM
When talking with executives at Bell Sports and American Recreation,
words and phrases like synergy, brand management and infrastructure
pop up as they prepare to merge operations.
Listen to Terry Lee, Bell's chairman and chief executive officer.
"There are as many synergies to this merger as I've seen
in my career."
Or Harry Manko, American Recreation's chairman. "We are strong
in distribution, and their great strength is in brand management
and research and development. There is a great deal we can accomplish."
If the merger, announced last month, is approved by shareholders
and federal regulators, American Recreation will become a subsidiary
of Bell Sports. Bell will become one of the largest companies
in the U.S. bicycle industry.
Lee, however, declines to elaborate on areas where the two companies
could work together. But he offered his definition for "synergy"
as it applies to Bell and American. "It means the two pieces,
together, are greater than the pieces individually."
Whatever Lee and Manko have in mind, they're keeping details under
wraps. But in conversations with competitors, exemployees, retailers
and analysts, an outline of what the merger could mean takes shape.
From retailers, there is a varied response. Some welcome the idea
of a larger, more financially secure supplier. Others fear such
a large company will trample them and their business.
"I want to see our suppliers be strong, stable and able to
deliver product. I think it's a positive thing for me," said
Steve Schmidt, president of Gorilla Bike & Fitness in Salt
Lake City, Utah. His stores did $1.2 million in sales with both
companies last year, Schmidt estimates.
Other retailers were more skeptical. "Of all the suppliers,
Service Cycle walks both sides of the aisle, mass merchant and
IBD, better than anyone. This merger just gives Bell a cleaner
entry into the mass market, which makes them a company I'm less
likely to buy from," said Bob Martin, owner of Frederick
Schwinn in Frederick, Maryland.
Analysts, competitors and others put a different spin on the proposed
· Specialty retailers could be most affected if Bell and
American's Service Cycle Supply division combine sales forces.
The combined brands-Bell helmets, Blackburn, VistaLite, Rhode
Gear and Advent accessories, along with Mongoose bicycles and
Service Cycle's nonproprietary parts and accessories offering-will
create a formidable package.
· Manko and Lee like to mention the contrasting strengths
between the two companies in domestic distribution. That could
lead to joint use of regional distribution management and infrastructure.
"We're taking one company that's marketing oriented, Bell,
and one that's distribution-oriented and putting them together,"
Photo: Terry Lee
· Bel1 is certain to benefit from American's strong presence
in the mass merchant channel. Its Cycle Products division is a
leading distributor of parts and accessories to mass merchants,
listing WalMart, Sears, Target, Toys R Us, Caldor and Sports Authority
Cycle Products brand names are staples among mass merchants. It
markets accessories under the Headwinds, BikeXtra and Copper Canyon
brands, as well as under names licensed from FisherPrice, Spalding,
Sesame Street and Disney.
· Each complements the other in foreign markets. Bell continues
to develop its infrastructure in Europe, where it has a factory
and offices in France. That will benefit American as it continues
to introduce its products overseas.
Bell also benefits from American's strong market share in Canada.
American owns Canada's Denrich Sporting Goods, the second largest
helmet factory in the world, and Cycletech Canada's third largest
distributor, based in Calgary.
· Bell and Service Cycle product lines have little overlap,
except for helmets, making the integration of their sales forces
a logical step. The cost savings of combining sales forces, while
not large, would be welcomed by Bell's shareholders who have seen
stock prices plummet over the past 18 months.
Bell executives blame low gross margins in recent quarters, in
part, on the rising cost of sales. Combining sales forces, and
product lines, could boost overall sales by creating opportunities
to leverage more Bell products onto retail sales floors.
Leveraging is common in the industry. Many retailers stock accessories
from a bicycle supplier to increase their credit line, receive
program discounts and keep the supplier from offering the line
to nearby stores.
Bell successfully leverages its Blackburn, VistaLite and Rhode
Gear brands. And bringing Mongoose bicycles into the mix could
increase Bell's penetration among retailers.
Conceivably, Bell's sales force could offer better pricing on
its accessories to retailers who also sell Mongoose bikes.
But some in the industry question whether any accessory brand
is strong enough to leverage a bicycle line onto showroom floors.
Most retailers put more importance on their bicycle lines than
"You don't buy the French fries to get the steak," one
industry analyst notes. Others point out that integrating sales
forces inevitably results in firings, and that can get ugly.
"You're severing your relationships with the dealers and
showing them you care more about cutting costs than about giving
good service. It's a very scary thing to do," said another
· Even if Bell waits to combine sales forces, its marketing
savvy should benefit the Mongoose brand. An executive at one of
Bell's competitors said Mongoose will benefit most from the merger.
"It's the second tier companies like Schwinn, Diamond Back
and Univega that have the most to fear from this, I think. Bell
has a lot of resources. They are rich. That will allow them to
do a lot of stuff with Mongoose, which is already a pretty strong
brand." he said.
Schmidt, at Gorilla Bike & Fitness, foresees similar benefits
for Mongoose. Gorilla has been the largest Mongoose dealer in
the nation for the last three years.
"Bell is a very good marketer and a good packager. Mongoose
does a great job spec'ing its bikes. I'm hoping that Bell can
help improve the appearance of the bikes just a teeny bit. That
could go a long way," Schmidt said
· The enormity of the proposed merger will change how Bell
is perceived within the industry. The companies had gross sales
of $270 million in the last 12 months, making it one of the four
largest companies in the U.S. bicycle industry, behind Huffy,
Murray and Roadmaster.
That figure puts Bell and American just ahead of Trek in gross
sales, most analysts said. While Trek is privately owned, estimates
put its annual sales at about $250 million.
· Competitors say they have little fear of Bell and American's
combined power. "We successfully competed against them when
they were separate. We'll be able to when they're together,"
said Dick Burman, vice president of Renaissance Marketing, a New
Jersey company that claims 17 percent of the U.S. helmet market
Photo: Harry Manko
It's Bell and American's largest competitor in the mass market.
His remark was typical of the response from other helmet competitors.
· With offices scattered between four states and Europe,
Bell's executives are using video conferencing to hold group meetings
on the merger.
Besides its warehouses, American has corporate offices in Commack,
New York and a product development facility in Torrance, California
In the name of cost cutting, expect the company to consolidate
many functions geographically within the first year or two of
But Don Biganeiss, owner of Big Ralph's Schwinn in St. Clair Shores,
Michigan, describes his fear that more of Bell Sport's products
will find their way into mass merchant and sporting goods outlets.
He describes himself as "a sarcastic individual" and
much of his colorful sarcasm regarding the merger is unprintable.
"This business keeps getting crazier and crazier. The whole
industry seems to be driven by fresh-out-of-college number crunchers
looking for bigger and bigger numbers before they move on,"
"I go out of my way to find products that aren't in Sports
Giant, which is getting harder to do, since Bell owns everything,"
Copyright 1995 by Miller Freeman, Inc, Santa Fe, New Mexico. All rights reserved.