Bauer Performance Sports Ltd. entered into a definitive agreement to acquire the Easton Baseball/Softball business for US $330 million in an all-cash transaction, subject to a working capital adjustment. Easton-Bell Sports also indicated it's in discussions regarding the sale of Easton Hockey to a third party, enabling the company to reinvest in Bell, Riddell, Giro, Blackburn & Easton Cycling.
ADVERTISEMENT The purchase agreement was unanimously approved by both companies' boards of directors and is expected to close in approximately 30-60 days, subject to regulatory approvals and other customary closing conditions.
The transformative acquisition enhances the Bauer's performance sports platform by adding Easton, described as "the world's leading and most iconic diamond sports brand," to the other strong brands in the BPS portfolio, including Bauer, Mission, Maverik, Cascade, Inaria And Combat. It also adds valuable intellectual property to BPS and provides a significant counter-seasonal business to the Company's existing revenue stream.
"The combination of the No. 1 brand in hockey and the No. 1 brand in diamond sports is a perfect example of our ability to enhance our performance sports platform," said Kevin Davis, president and CEO of Bauer Performance Sports. "Our existing business is built on a heritage of investing in game-changing research and development, intellectual property, authentic brands and strong consumer connections. The Easton Baseball/Softball business is a perfect fit for our overall platform."
The combined company would have generated pro forma sales and Adjusted EBITDA in 2013 (year ended December 31, 2013 for Easton Baseball/Softball and twelve months ended November 30, 2013 for BPS) of approximately US $586 million and US $94 million, respectively, excluding synergies that are expected to be realized through operational efficiencies. The purchase price values Easton Baseball/Softball at an Adjusted EBITDA multiple of 9.0x, including the value of the tax benefit acquired as part of the transaction. Management expects the acquisition to be immediately accretive to Adjusted Earnings per Share.
The acquisition will provide significant revenue growth opportunities for BPS, which has experienced a 7% compound annual revenue growth rate from 2009 to 2013. Such opportunities include:
?nbsp; Expansion in the diamond sports segments currently served by Easton,
?nbsp; The expansion of Easton Baseball/Softball's apparel business to include uniforms, and
?nbsp; Territorial expansion of the Easton Baseball/Softball business.
"The addition of Easton Baseball/Softball will increase our growth potential and deliver immediate value to our shareholders," Davis said. "Just as we have done in our hockey business, we expect to increase Easton's current 28 percent market share in diamond sports by accelerating investment in product development and more strongly connecting with consumers. Like the entire BPS organization, Easton Baseball/Softball has a passion for improving the performance of athletes, and we fully expect to raise the bar of innovation in diamond sports with this acquisition."
As a result of the acquisition, BPS will own the Easton brand and the Easton Baseball/Softball business while Easton-Bell Sports will retain the Easton Hockey and Easton Cycling businesses. At closing, BPS will enter into a license agreement to permit Easton-Bell Sports to use the EASTON name in hockey and cycling only. No other businesses from the Easton-Bell Sports portfolio are included as part of this transaction. Easton Baseball/Softball will continue to operate out of its current Van Nuys, Calif. and Salt Lake City, Utah locations.
BPS and Easton-Bell Sports have also agreed to settle certain intellectual property litigation matters related to patents held by Bauer Hockey concurrently with the closing of the transaction.
Transaction Financing
BPS intends to finance the transaction, and refinance certain existing indebtedness, with a combination of approximately US $200 million of an asset-backed revolving credit facility and approximately US $450 million of senior secured loans. Bank of America Merrill Lynch, JP Morgan, Royal Bank of Canada and Morgan Stanley have provided BPS with fully committed credit facilities sufficient to close the transaction.
After the transaction closes, BPS intends to consider options it may have to reduce its leverage, including repaying a portion of the senior secured loans with the proceeds of public or private offerings of equity securities. There is no assurance that such transactions will be available on acceptable terms.
Paul, Weiss, Rifkind, Wharton & Garrison LLP and Stikeman Elliott LLP acted as legal counsel to BPS. Morgan Stanley acted as financial advisors and Ropes & Gray acted as legal counsel to Easton-Bell Sports.
In a separate statement, Easton-Bell Sports, Inc. confirmed that it entered into the agreement with Bauer Performance while also noting that its working towards an agreement with a third party for the sale of Easton Hockey.
Proceeds from these transactions will be used to grow and reinforce the market-leadership of the company's remaining brands ?Bell, Riddell, Giro, Blackburn and Easton Cycling ?as well as to strengthen the company's balance sheet and for other strategic initiatives. Following the completion of these transactions, the company will be renamed BRG Sports and will focus on the attractive Action Sports and Football markets.
"These transformational transactions provide a terrific opportunity for us to focus on growing our core football and action sports brands and enhancing our cutting-edge, market-leading products, while simultaneously streamlining our operations and solidifying our financial strength," said Easton-Bell Sports Executive Chairman and CEO Terry Lee. "Becoming a leaner, more focused organization will further enable BRG Sports to move faster and smarter, take full advantage of strategic growth opportunities, and strengthen its broad leadership position in today's competitive marketplace."
Lee continued, "We are very proud of the strong baseball/softball business we built, which set the standard for innovation and excellence in the industry. We are confident that under BPS' leadership this business will achieve its full potential."
Easton-Bell's current owners, Fenway Partners, LLC and Ontario Teachers' Pension Plan, will maintain their investments in the Company.
Morgan Stanley & Co. LLC acted as financial advisor, and Ropes & Gray, LLC acted as legal advisor to the Company in connection with the transactions.
