KMD Brands chairman David Kirk today said the proposal created no value for shareholders, and was challenging from an execution standpoint.
“In addition, the combination of multiple surf brands that directly compete with each other is not a strategy that has proven effective. Our focus remains on executing the Next Level strategy, which has already gained momentum,” Kirk said.
KMD Brands chairman David Kirk said the company’s board of directors felt the proposal wouldn’t benefit its shareholders.
What was proposed
According to Stokehouse’s proposal, Rip Curl would be split from KMD Brands and merge with Stokehouse, with Stokehouse shareholders to own 22% of the merged entity.
In addition, Naude would become chief executive of the combined business, leading from California.
While the brands are highly complementary, with geographic, channel and seasonal diversity, KMD Brands said the Stokehouse business is limited in scale and has significant debt relative to its earnings profile.
KMD Brands said the proposed ownership structure was misaligned with the earnings delivered by the Stokehouse and Rip Curl businesses, given Stokehouse’s “immaterial contribution” to combined earnings before interest, tax, depreciation and amortisation.
The board of directors also said it would “unfairly dilute KMD Brands’ shareholders”.
They said that separating the businesses would create “significant dis-synergies”, consuming material resources, taking substantial time and incurring material one-off costs.
It would also create two small entities with less combined profitability than compared to KMD Brands standalone, given the costs associated with the de-merger.
Perhaps the biggest concern for the board of directors was that Stokehouse did not propose to introduce any new capital for the acquisition, instead relying on a large capital raise by the smaller demerged entity, which would further dilute KMD Brands’ shareholders.
The sources of the required debt and equity funding for both businesses were also unclear and uncertain under the proposal.
At KMD Brands’ last full year result in September 2025, Rip Curl had increased its sales by 2.1% compared to 2024, up from $538.9 million to $550.4m, although the brand’s earnings before interest and tax fell by 49.3%.
For the first quarter of the 2026 financial year, Rip Curl’s sales were up by 6.6%.
KMD Brands is set to report its 2026 first half result on Wednesday.
Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.
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