Bass Pro Buying Cabela's

[OutdoorWriter]

By Abhijith Ganapavaram
Fishing and hunting equipment chain Cabela's Inc (CAB.N) said it agreed to be bought by Bass Pro Shops in a deal valued at $5.5 billion that will help the privately held company nearly double its store count in North America.

The offer of $65.50 per share is a 19.2 percent premium to Cabela's close on Friday.

Shares of Cabela's jumped nearly 15 percent to $63.00 in early trading, their highest in more than a year. Up to Friday close, they had risen 17 percent since the company said in December it was exploring strategic alternatives.

Cabela's has struggled with declining sales of apparel and footwear and has reported same-store sales growth in only one quarter in more than three years.

The retailer had been under pressure from activist hedge fund Elliott Associates L.P, which disclosed an 11.1 percent stake in October last year, to pursue strategic alternatives.

Reuters reported on Sunday that a consortium of Bass Pro Shops, Goldman Sachs Group Inc's (GS.N) private equity arm and Capital One Financial Corp (COF.N) was in the lead to buy the company.

The combined company will own 184 stores in the United States and Canada.

Cabela's also agreed to sell its credit card business called "World's Foremost Bank" to Capital One Financial Corp (COF.N), which will forge a 10-year partnership with Bass Pro Shops to issue credit cards to Cabela's customers.

Capital One spokeswoman Pam Girardo said terms of the transaction would not be disclosed.

Bass Pro Shops founder and CEO Johnny Morris will continue as CEO and majority shareholder of the combined company, which will remain private.

Bass Pro Shops will finance the deal through preferred equity financing commitments of $1.8 billion from Goldman Sachs and $600 milllion Pamplona Capital Management.

Springfield, Missouri-based Bass Pro Shops has long been in the running to acquire Cabela's.

J.P. Morgan Chase & Co advised Bass Pro Shops and Guggenheim Securities advised Cabela's.


TONY MANDILE

How To Hunt Coues Deer

 

[BRUIN4L]

Bass Pro sux

 

[DW]

Sad day.

 

[eelgrass]

I'm going back to Herter's

 

[feddoc]

>I'm going back to Herter's


Speaking of Herters....I ran across an old piece of .300 Winnie brass made by Herters.

 

[BeanMan]

The Grand Junction store has been a huge disappointment to me. High prices and outside of the gun dept low to mid range gear.

 

[eelgrass]

>>I'm going back to Herter's
>
>
>Speaking of Herters....I ran across an
>old piece of .300 Winnie
>brass made by Herters.

It probably only cost about 10 cents.

 

[OutdoorWriter]

This is a good analysis from the OUTDOOR WIRE of the background of this sale:


Bass Pro Shops Announces Cabela's Acquisition
Since Cabela's delayed its nomination process for directors earlier this year, the question on Wall Street about Cabela's changed from "if to "when". As in "when is the Bass Pro Shop acquisition finally going to be announced?"

Yesterday, news that Bass Pro Shops would be paying $65.50 per share for Cabela's stock, that question was answered.

Along with the announcement of the $5.5 billion dollar deal, Bass Pro Shops founder Johnny Morris sent a message to the rest of the sporting goods industry: you may be struggling, but the outdoors is doing just fine, thank you.

For the past year, general sporting goods retailers, for the most part, have had hard times. The Sports Authority and Sport Chalet are either going - or gone, Golfsmith is in Chapter 11 bankruptcy, and they're just the tip of the brick-and-mortar iceberg.

But the hunting and fishing segments of the sporting goods industry, despite declining participation numbers, have kept steady. And that steady performance may have actually helped precipitate this mega-deal. Compared to others -including Bass Pro Shops- Cabela's performance was lagging.

Last September, Cabela's laid off four percent of the corporate workforce in its longtime home of Sidney, Nebraska. Among those being cashiered were Sidney Mayor Mark Nienheuser, a Cabela's VP.

In October, Cabela's announced third-quarter earnings. They pronounced "dismal" by Wall Street and kicked off a series of articles criticizing the company for everything from overly-aggressive expansion to poor inventory management.

Less than a week later, activist hedge fund Elliott Management announced an 11.1 percent stake in the company- and promptly called for changes -including potentially breaking off profitable units or selling off the business entirely.

As early as November 5, it was reported by business media (and The Outdoor Wire) that Bass Pro Shops was exploring a purchase. Neither company would comment, but the rumors persisted.

On November 19, 2015, Bloomberg Business News reported that Cabela's was "shopping itself around" to private equity firms.

Shortly afterwards (December 2), Cabela's announced it would undergo a "strategic review". Having watched Wall Street for more than 35 years, I know that's "street speak" for either breaking up or selling a company.

Things were quiet through the rest of December, but on January 5, Cabela's changed its bylaws to delay director nominations. Wall Street observers interpreted that as a sign that Elliott Management was granting the company "breathing room" to pursue a sale.

In February, the most telling sign that "something" was happening: Cabela's Chairman Jim Cabela disclosed via an SEC filing that he had transferred 11.2 million Cabela's shares into a charitable trust in 2015. Since charitable trust transfers are irreversible, it was seen by Wall Street as the final confirmation that a sale of some sort was going to happen.

Yesterday, with the announcement of the acquisition, the last shoe dropped in a transaction most Wall Street observers have long considered a foregone conclusion.

After the announcement Cabela's shares jumped fifteen percent, closing at $63.18/share- an increase of $8.24/share. That's still $2 and change below the all-cash BPS purchase price of $65.50/share.

But that price is 39.7 percent higher than the December 1, 2015 price-the day before Cabela's announced the company would be undergoing "strategic review."

The official announcement of the deal points out that this acquisition will unite-in a private company in which Johnny Morris retains majority ownership - three disparate, yet similar groups: Cabela's- regarded as the leader of the trio in the hunting category, Bass Pro Shops, which focuses heavily on fishing, and White River Marine Group -the Morris-owned concern that owns Tracker Boats, Sun Tracker, Nitro, Taho, Regency, Mako, Ranger, Triton and Stratos boat brands.

Rather than point out the behemoth that represents, Morris characterized the announcement as a "special opportunity" to bring together "three special companies with an abiding love for the outdoors and a passion for serving sportsmen and sportswomen."

Cabela's CEO Tommy Millner echoed the sentiment, but added the Cabela's board had undertaken a "thorough strategic review" during which they assessed "a wide variety of options to maximize value" and unanimously agreed this deal would be the best for Cabela's shareholders and the company's customers.

"Conservation is at the heart and soul of Bass Pro Shops," says Morris. "Bass Pro Shops and Cabela's share a steadfast belief that the future of our industry, and the outdoor sports we all love, depends - more than anything else - on how we manage our natural resources." said Morris. "By combining our efforts, we can have a profound positive impact on the conservation challenges of our day and help foster the next generation of outdoor enthusiasts."

It's anticipated that the transaction will close sometime in the first half of 2017, barring regulatory hiccups. Just prior to that closing, Capital One will acquire "certain assets and assume certain liabilities" of Cabela's World's Foremost Bank. The cash proceeds of that transaction will remain with Cabela's until it is acquired by Bass Pro Shops.

Capital One will also originate and service the Cabela's CLUB, Cabela's co-branded credit card. BPS says it will maintain a "seamless integration between the credit card program and the combined companies' retail operations and deep customer relationships."

So what's really in store for the 19,000 "outfitters" (employees) of Cabela's?

That's a question we're certainly not in a position to answer, but despite Morris' insistence that he appreciates the history of Cabela's and relationship with Sidney, Nebraska, he's not built Bass Pro Shops to its present level by ignoring business basics.

And it's a fact that Cabela's has seen its operating margins drop by nearly a third between 2013 and 2015 (10% versus 7.7%, respectively) and repeated criticism of Cabela's management haven't been limited to the aforementioned issues of perceived over-expansion or ongoing issues with supply-chain management.

Perhaps a larger question is whether the deal would have happened at all had "activist" Elliott not decided to push publicly-traded Cabela's to take action to expand shareholder value.

Apparently, however, the agreed-on price satisfied Elliott, which purchased its 11.1 percent stake in Cabela's at prices ranging from $33.39 to $48.05/share. And this deal demonstrates Elliott Management's ability to instigate big transactions in the retail space.

Yesterday's announcement didn't come as a huge surprise to the outdoor industry, but it did prompt several phone calls with business predictions.

Some were serious. Virtually all pointed out Morris' longstanding reputation for driving hard bargains with vendors and suppliers.

Others were decidedly not.

One wag said marine engine manufacturers are already dreading the possibility that Morris would call them to order "1,000 of your 150hp outboards". The dread would be because "he'd only pay for them after he sold the boats he planned to hang them on."

It's funny, but points out one recognized fact in business: betting against Johnny Morris might not be a good idea.

As always, we're watching, and we'll keep you posted.

?Jim Shepherd






TONY MANDILE

How To Hunt Coues Deer

 

[Bughalli]

Sad day. Cabelas might not have the best prices, but they usually provided great customer service, good knowledge base and a quality experience in stores or online. Love their credit card, such an easy way to earn free gear. There's a lot of history and memories from their catalogs and cover paintings. As a kid you couldn't wait to see the new catalog.

For whatever reason I'm not a big a fan of Bass Pro. Whenever I check them out they have limited product selection and the online experience feels cheap/low quality. Plus they certainly focus more on fishing vs hunting.