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April 05, 2016 02:00 AM

Samsonite to bring its plastics expertise to Tumi

Steve Toloken
Assistant Managing Editor
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    Samsonite International SA
    Samsonite International SA has in-house molding for its hard-shelled plastic suitcases. It will bring that expertise to its new acquisition, Tumi Holdings Inc.

    Luggage maker Samsonite International SA has bought another prominent maker of suitcases, Tumi Holdings Inc., in a purchase that Samsonite said was driven partly by potential for innovations in hard-shelled plastic luggage.

    Samsonite CEO Ramesh Tainwala said the $1.8 billion acquisition of high-end luggage maker Tumi will allow Samsonite to expand in the premium business travel bags segment, and will help South Plainfield, N.J.-based Tumi become more global.

    Beyond access to more consumers, he said the merger also will create opportunities in “product design and technical innovation, especially in the area of lightweight hardside luggage.”

    Samsonite, which is traded on the Hong Kong Stock Exchange, said in a filing it would be “expanding and enhancing Tumi's hardside strategy, particularly in the premium Asian and European markets by leveraging [Samsonite's] clear strength in hardside innovation.”

    “[An] impediment for them today is they are not good at hardside luggage,” Tainwala said in comments at a March 4 news conference in Hong Kong. “We can bridge those knowledge gaps for them.”

    He said the premium luggage market in North America, where Tumi got 68 percent of its $548 million in sales last year, is mainly a softside luggage market. In contrast, those markets in Asia and Europe are “almost entirely hardside,” he said.

    Still, he said in its higher-end business markets, Tumi designs and develops “products far better than us.”

    Samsonite had $2.4 billion in sales last year.

    “This is a transformational acquisition for Samsonite,” Tainwala said. “It will meaningfully expand our presence in the highly attractive premium segment.”

    Since 2012, Tumi has been using Milliken & Co.'s Tegris brand polypropylene composite material for its Tegri-Lite brand of suitcases.

    Samsonite uses a PP composite from Germany's Propex Fabrics, marketed under the brand name Curv.

    It's not immediately clear what impact the combination would have on their manufacturing supply chains.

    Publicly traded Tumi said in filings to the U.S. Securities and Exchange Commission that it outsources all of its manufacturing to more than 20 third-party Asian manufacturers in China, Vietnam and Thailand.

    Since 2010, Tumi said it has also manufactured in the Dominican Republic as a “sourcing diversification strategy which takes advantage of Caribbean free-trade arrangements.”

    Samsonite, by contrast, has its own factories for plastic processing, as well as a joint venture molding operation in India, Tainwala Group, that is owned by members of Samsonite CEO Tainwala's family.

    The India operation makes ABS and polycarbonate suitcases.

    In 2014 Samsonite spent $11 million to expand its injection molding plant in Hungary, expanding capacity by 28 percent to make polycarbonate-shelled cases in addition to the older style Curv PP composite cases.

    Samsonite Chairman Timothy Parker called the extension of the company's manufacturing capacity in Europe an important development.

    “‘Made in Europe' is important to many of our customers, especially in Asia, and we believe that this will create a source of competitive advantage over the medium term as well as provide some hedge against adverse currency movements,” he said.

    Tainwala also said there is enormous potential for cost savings in their supply chains from the merger.

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