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 merger:

· 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," Lee said.

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 as customers.

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 their accessories.

"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 industry analyst.

· 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 the merger.

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," he said.

"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," Biganeiss said.

Copyright 1995 by Miller Freeman, Inc, Santa Fe, New Mexico. All rights reserved.