Rip Curl owner KMD Brands has rejected a demerger offer from Stokehouse, a US-based surf company that it describes as having “limited scale and profitability”.

The deal would’ve seen KMD Brands demerge Rip Curl into a separate NZX and ASX-listed company and subsequently merge Rip Curl with Stokehouse. 

Founded in 2014 by Paul Naude, the former CEO of Billabong USA, Stokehouse Unlimited owns the brands Vissla, Sisstrevolution and Amuse Society.

Notifying the ASX of its stance on the deal, KMD said that while it has received an offer from Stokehouse, it decided that it “is not in the best interests of shareholders as it does not provide a clear path to enhance shareholder value”.

Stokehouse proposed that after the deal, its shareholders would own 22 per cent of the merged entity.

This decision not to proceed, KMD said, was made based on the considerations, including Stokehouse’s financial position; proposed ownership splits in relation to earnings; creation of ‘dis-synergies’ and the incurring of costs.

“The concept proposed by Stokehouse creates no value for shareholders and is challenging from an execution standpoint,” David Kirk, chairman of KMD Brands, said.

“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.”