GT Bicycles Inc. of Santa Ana said Monday it has agreed to be purchased by the makers of Schwinn bicycles for $80 million, a deal that would create one of the world's largest bicycle companies.
GT's purchase by Schwinn Holdings Corp., a unit of privately held Questor Partners Fund, would form a company with $400 million in annual sales and marks the latest round of consolidation in the hotly competitive business.
Schwinn is buying the nation's largest maker of BMX bicycles, considered a growth niche now that mountain bike sales have leveled off. It 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 plant, which has about 450 employees, will continue as usual, Haynes said. No layoffs or management changes are expected, he said.
GT 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 also is picking up its Riteway Products unit, a leading distributor of bikes, parts and accessories.
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. Questor bought Schwinn in September, three years after the bicycle maker emerged from bankruptcy reorganization.
Since acquiring Schwinn, Questor has adopted more aggressive marketing, acquisition and expansion programs.
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 at its lowest price in a year.
Boulder, Colo.-based Schwinn would 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 is expected to be completed by the third quarter of 1998.