Canadian Cyclist


February 20/02 8:05 am - SRAM Purchases Rock Shox

Posted by Editor on 02/20/02

SRAM Buys Rock Shox

Component manufacturer SRAM has reached an agreement to purchase suspension manufacturer Rock Shox. It has been no secret that Rock Shox has been struggling for the past couple of years, facing declining market share and increased costs in the U.S. (which is why they moved their operation from California to Colorado).

This is SRAM's second major acquisition - they took over German component and chain manufacturer Sachs in late 1997 - and appears to be in line with the company's goal of competing directly with Shimano in all categories.

The Rock Shox brand, despite its recent financial difficulties, is a still a very powerful one, and the injection of capital by SRAM could see it return to the forefront of the suspension market.

It is too early to say how the sale will affect the current Canadian distribution agreement with Cycles Lambert.

Full Press Releases

Chicago, Illinois - February 19, 2002 - SRAM Corporation is pleased to announce that it has signed a definitive agreement to purchase RockShox Inc. The agreement includes working capital and an anticipated transaction closing date in mid-March.

"The management teams at SRAM and RockShox are very excited about bringing these two great companies together. The integration of RockShox's full line suspension within SRAM's core product groups will contribute significantly toward SRAM's mission of being the most valuable supplier to the industry", said Stan Day, President of SRAM. "We believe that our new larger organization with full product lines in drivetrain, suspension, and brakes will better serve our customers. The timing is perfect as issues of supply chain management are a top priority to bike factories and aftermarket distributors globally."

SRAM and RockShox managers will be working on an integration plan that will be completed by June. Aspects of this plan will be presented at a SRAM press conference during this year's Taipei International Bicycle Show.

In the near term, the ongoing introduction of 2003 products, manufacturing, sales and customer service will remain the responsibility of the respective management groups at SRAM and RockShox. Customers should therefore continue to contact the companies separately with respect to these issues.

RockShox, Inc. (RSHX.OB) - a leading developer of high performance mountain bike suspension products - today announced that it has entered into a definitive agreement to be acquired by SRAM Corporation.

The transaction is structured as a merger of RockShox with a wholly-owned subsidiary of SRAM Corporation, in which stockholders of RockShox will receive the cash amount of $0.41 per share. As a result, following the merger, RockShox will operate as a subsidiary of SRAM Corporation. The merger is subject to a number of closing conditions. The parties expect that, subject primarily to the fulfillment of such closing conditions and to the timing of approval by regulatory authorities of an Information Statement to be sent to stockholders, the transaction will be completed in late March or early April 2002.

The Board of Directors of RockShox has received an opinion from Duff & Phelps, one of the nation's largest independent specialty investment banking and financial advisory firms, that the transaction is fair from a financial point of view to the non-insider stockholders of RockShox.

Bryan Kelln, RockShox' President & Chief Executive Officer, stated, "The leadership team of RockShox has been very focused over the past two years to restructure the company. We have made many changes which have produced a reduced cost structure, a strong product line, and wonderful customer relationships. However, the costs associated with the restructuring, combined with the costs associated with our patent defense litigation and a product recall last year, have left us in a difficult liquidity position, as we have noted in our public filings. Finally, industry-wide sales declines over the past year hampered our ability to generate revenue."

"We are pleased to announce the acquisition of RockShox by SRAM Corporation," continued Kelln. "We believe that this transaction presents great value for our stockholders and is a strong opportunity for our customers and suppliers."

"We are delighted to have the opportunity to put together two of the strongest brands in the bicycle industry," said Stan Day, President & Chief Executive Officer of SRAM Corporation. "We have been interested in diversifying our core business into suspension, and the RockShox opportunity fits perfectly with that strategy. The SRAM/RockShox combined entity will enable synergies across the businesses - from sales and marketing benefits to our Original Equipment and Aftermarket customer base, to enhanced and integrated product development for the riding enthusiast. Together, our global strength will enable us to have an even more meaningful presence in the industry, at events, and with the consumer," Day continued.

The management teams of the two companies will work closely over the coming months to finalize the acquisition and to create a transition plan.

This press release contains "forward-looking statements" (as defined under Federal securities law) regarding the planned merger of RockShox with SRAM Corporation. The ability of RockShox to consummate the merger transaction may differ materially and adversely from those discussed in this press release. Factors that may cause such a difference include, without limitation, failure by RockShox to satisfy the closing
conditions set forth in the merger agreement and other risks associated with acquisitions. There can be no assurance that the merger will be completed on the intended schedule. For additional information about factors that could affect the business of RockShox or its ability to consummate the merger, see the documents filed by RockShox with the United States Securities And Exchange Commission.


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