Santa Ana’s GT Bicycles to Be Bought by Schwinn


GT Bicycles Inc. of Santa Ana said Monday that it has agreed to be acquired by the makers of Schwinn bicycles for $78.6 million in a deal that will create one of the world’s largest bicycle manufacturers.

GT’s purchase by Schwinn Holdings Corp., a unit of Questor Partners Fund LP, forms a company with $400 million in annual sales and marks the latest round of consolidation in the hotly competitive cycling industry.

Colorado-based Schwinn is buying the nation’s largest maker of BMX bicycles, considered a growth market now that mountain bike sales have leveled off. Schwinn also is gaining important distribution channels and GT’s “state-of-the-art” manufacturing plant in Santa Ana, analysts said.


For GT, the sale will give it the money it needs to expand the brand, said Mike Haynes, GT’s chief executive.

Operations at the 350,000-square-foot Santa Ana facility, which has about 450 employees, will continue as usual, Haynes said. No layoffs are anticipated, he said.

“This combination of Schwinn--good in youth--and GT--good in BMX--is a powerful combination,” said Fred Clements, executive director of the National Bicycle Dealers Assn. in Newport Beach. “I don’t believe Trek as No. 1 overall is going to have an easy time overcoming.”

Indeed, the combined companies should rival Trek, owned by Intrepid Inc., as the nation’s largest bike company selling through bicycle shops. Huffy Corp., which sells through mass merchants, is the nation’s largest bicycle company.

While Schwinn has long been known as “a family brand,” GT has a “cachet among the youth,” partly because of the company’s investment in racing bikes, Clements said.

GT expanded on that image earlier this year by producing a half-hour television show on BMX and freestyle cycling and riders for the Fox Sports Network.

The company makes bicycles sold under the GT, Powerlite, Robinson and Dyno brand names and claims about 40% of the BMX market. It specializes in high-end bikes that range in price from $149 to $1,100. The company’s highest-priced bike--designed for downhill racing--sells for $5,500.


Besides GT’s manufacturing business, Schwinn is picking up its Riteway Products, a leading distributor of bikes, parts and accessories.

The growing appeal of BMX bikes is seen in Huffy’s recent release of a BMX bike, which “shows there’s a lot of interest in this end of the bike business,” Clements said.

GT was founded by Richard W. Long and Gary Turner, who started the business in his Santa Ana garage. Initially, Turner was piecing together bike frames and selling them one at a time to Long, who had a bike shop in Anaheim.

GT, which incorporated in 1979 and went public in 1995, has had sales increases each year except one, Haynes said. Its stock, however, has fallen 44% since August, while the Nasdaq Composite index of small-company stocks rose 11%.

Long was killed in a motorcycle accident in 1986. Turner still works with the company in an advisory capacity but is not involved with the daily operations, Haynes said.

Schwinn, founded in 1895, makes bikes under the Schwinn and Yeti brands. The company also makes fitness equipment.

Schwinn has long-term brand awareness and is strong in bikes in the $200 to $400 price range. Both companies sell in independent bike shops rather than mass-market retail chains.

“GT perfectly complements Schwinn and has tremendous distribution capabilities both domestically and abroad,” said Schwinn Chairman Dan Lufkin in a statement.

Michigan-based Questor, formed in 1995 to buy under-performing companies, bought Schwinn last September, three years after the bicycle company emerged from bankruptcy reorganization.

Since acquiring Schwinn, Questor has adopted more aggressive marketing, acquisition and expansion programs.

Schwinn and GT have been discussing the acquisition for several months, Haynes said.

Schwinn’s offer represents a 68% premium over GT’s closing stock price of $4.75 on Friday. Investors warmed to the news Monday, bidding GT stock up by $2.38, or 50%, to $7.13.

In early trading Monday before the deal was announced, GT stock was hovering near its 52-week low.

Schwinn will pay $8 a share for GT and assume about $90 million in GT debt.

The merger is subject to approval of GT stockholders and various regulatory agencies. The deal should be complete by the third quarter of 1998.