L Capital sees 2XU as a good fit

Just as L Capital is at home with the finer things - its main backer is French luxury conglomerate LVMH - it has equally strong sportswear credentials. Prior to joining the firm, Managing Partner Ravi Thakran worked for Nike, while Uday Mehra, head of operations, was apparel business director for the global sportswear brand.

"These people are able to bring a lot of direct domain knowledge to the company," explains Christina Teo, managing director with L Capital. "And that is part of what attracted them to us: it was our ability to work in partnership with 2XU and for the value-add we could create."

Competition for 2XU was not in short supply. The firm had already received backing from Lazard Private Equity - which acquired a significant minority stake in 2011 via Lazard Corporate Opportunity Fund 2 - and a number of strategic investors were keen to acquire the asset. But L Capital won out, paying around A$75 million ($68.3 million) for a 40% stake.

The transaction, a pro-rata sell down by all shareholders, represented a partial exit for Lazard, generating a 2x return.

L Capital now plans to further 2XU's global ambitions. Set up in 2005, the company makes a range of high performance compression clothing aimed at the technical sportswear market for runners, swimmers, cyclists and triathletes.

To date the firm is mainly a wholesale business with a global distribution network covering more than 50 countries. It has online stores in Australia, New Zealand, Japan, Korea, Singapore, North America and Brazil.

"While the company has a large in presence in Australia as well as in the US, it is still the tip of the iceberg," says Teo. "And the company is also yet to expand into China."

This is something L Capital has already sought to remedy by approaching Chinese distributors. It is also looking to support the expansion of 2XU's network of own-branded outlets, of which there are just 17, all in Australia.

The second part of the strategy is to broaden product offerings. 2XU currently focuses on sportswear for both men and women but Teo sees other applications for its compression fabric technology. "We are looking at both sports and non-sports categories - military as well as medical segments," he says."So there is a lot of scope for product category extension."

The expectation is growth will be predominately organic though M&A could play a role should opportunities present themselves.

In terms of exit, L Capital is open-minded. "In last round there was a lot of interest coming from domestic and international strategic investors," Teo notes. "We should keep it flexible - even a listing is possible for a company like this."

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• Topics
• Expansion
• Australasia
• Consumer
• L Capital Asia
• Consumer
• Growth capital
• Australia