"We realise, Rip Curl, our baby has grown into an adult recognised all over the planet and we are proud that we have created one of the world’s great brands," the founders said. The acquisition, announced on Tuesday, will see ASX-listed Kathmandu's revenues exceed $1 billion for the first time and will help the company diversify further away from its outdoor apparel roots. Rip Curl primarily sells surfing-related products such as wetsuits and boardshorts. The acquisition follows Kathmandu's purchase of US hiking boots brand Oboz early last year for $NZ75 million ($70 million). Rip Curl chief executive Michael Daly will continue to lead the firm and will report to Kathmandu chief executive Xavier Simonet.

"There are strong parallels with both Rip Curl and Kathmandu. Bringing them together will build on our respective strengths across product, marketing and distribution channels,” said Mr Daly. RipCurl's founders had previously attempted to sell the business for a reported $500 million in 2012 and for $400 million in 2017. The company had also toyed with the idea of listing on the sharemarket. In the 2019 financial year, Rip Curl's normalised revenue was $455 million, with earnings before interest, tax, depreciation and amortisation (EBITDA) of $49 million. Rip Curl sponsors the likes of Mick Fanning. Credit:WSL Mr Singer and Mr Warbrick each hold 35.5 per cent of Rip Curl, and will, along with Mr Daly, receive a portion of 10.9 million Kathmandu shares in exchange, worth a total of $31 million.

The remaining 30 per cent of the company is owned by the holding company for Rip Curl's international operations and a range of former and current staff. Mr Warbrick and Mr Singer's shares are held within trusts, and if the deal goes ahead, Mr Warbrick will receive approximately $41 million and Mr Singer will receive $58 million, due to him owning a larger percentage of his trust. Loading The two have taken home millions in dividends each year due to their large shareholdings and Rip Curl's respectable profits. The acquisition will mostly be funded through a $138 million capital raise and a new $220 million debt facility, with Kathmandu shareholders able to participate in the capital raise on a 1-for-4 share basis. All the company's directors intend to participate in the offer.

Kathmandu is hoping the acquisition will boost its EBITDA by 10 per cent to around $NZ151 million, and hopes to achieve cost savings by combining shared support functions. Kathmandu shareholders will be required to approve the deal at a special meeting on October 18. Kathmandu's largest shareholder is NZ retailer Briscoe Group, who once attempted to purchase the entire company. In a statement, Mr Simonet said the acquisition was a "fantastic opportunity" for the business. Rip Curl's success has come in no small part thanks to the popularity of its high-quality wetsuits. Credit:Joe Armao "The combination of Kathmandu, Oboz and Rip Curl achieves diversification in product, channel, geography and seasonality, and creates a platform for the acceleration of our brands’ global expansion into new channels and markets," he said.

Kathmandu's shares are currently in a trading halt until the completion of the capital raise on Friday. They last traded at $2.79. Morgan Stanley analyst James Bales has set a price target of $2.60 for the shares, saying while Kathmandu appears to be "doubling down" on wholesale and the strength of Rip Curl's brand, he questioned the strategy behind the purchase's and its reliance on debt funding.