Transformative Acquisition Adds No. 1 Market Share in Baseball/Softball and Valuable Intellectual Property to Bauer Performance Sports Portfolio; Transaction Expected to be Immediately Accretive
Management to Discuss Acquisition via Conference Call Today at 6:30 p.m. ET
EXETER, NH – February 13, 2014 – Bauer Performance Sports Ltd. (TSX: BAU) (“BPS” or the “Company”), a leading developer and manufacturer of high performance sports equipment and apparel, has entered into a definitive asset purchase agreement with Easton-Bell Sports to acquire the Easton Baseball/Softball business for US $330 million in an all-cash transaction, subject to a working capital adjustment. The purchase agreement was unanimously approved by both companies’ boards of directors and is expected to close in approximately 30-60 days days, subject to regulatory approvals and other customary closing conditions.
The transformative acquisition greatly enhances the Company’s performance sports platform by adding EASTON, 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:
- Expansion in the diamond sports segments currently served by Easton,
- The expansion of Easton Baseball/Softball’s apparel business to include uniforms, and
- Territorial expansion of the Easton Baseball/Softball
“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% 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, California 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.
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.
BPS will hold a conference call today, February 13, 2014, at 6:30 p.m. Eastern time to discuss the transaction. The Company’s President and CEO Kevin Davis and CFO Amir Rosenthal will host the call, followed by a question and answer period.
Date: Thursday, February 13, 2014
Time: 6:30 p.m. Eastern time
Dial-in number: 1-888-846-5003
International dial-in number: 1-480-629-9856
Conference ID: 4669396
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.
Presentation slides that discuss the transaction will also be made available via the investors section of the Company’s website at www.bauerperformancesports.com.
A replay of the conference call will be available after 9:30 p.m. Eastern time on the same day through February 27, 2014.
Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4669396
ABOUT BAUER PERFORMANCE SPORTS, LTD
Bauer Performance Sports Ltd. (TSX: BAU) is a leading developer and manufacturer of ice hockey, roller hockey, lacrosse, baseball and softball equipment, as well as related apparel. The company has the most recognized and strongest brand in the ice hockey equipment industry, and holds the top market share position in both ice and roller hockey. Its products are marketed under the BAUER, MISSION, MAVERIK, CASCADE, INARIA and COMBAT brand names and are distributed by sales representatives and independent distributors throughout the world. Bauer Performance Sports is focused on building its leadership position and growing market share in all product categories through continued innovation at every level. For more information, please visit www.bauerperformancesports.com.
This press release uses the following non-IFRS measures: EBITDA and Adjusted EBITDA and Adjusted Earnings per Share. The foregoing non-IFRS measures are defined as follows: Adjusted EBITDA is defined as EBITDA (net income adjusted for income tax expense, depreciation and amortization, losses related to amendments to the credit facility, gain or loss on disposal of fixed assets, net interest expense, deferred financing fees, unrealized gains/losses on derivative instruments, and realized and unrealized gains/losses related to foreign exchange revaluation) before restructuring and other one-time or non- cash charges associated with acquisitions, other one-time or non-cash items, pre-initial public offering sponsor fees, costs related to share offerings, as well as share-based payment expenses. Adjusted Earnings per Share is defined as Adjusted Net Income/Loss divided by the weighted average diluted shares outstanding. Adjusted Net Income/Loss is defined as net income adjusted for all unrealized gains/losses related to derivative instruments and unrealized gains/losses related to foreign exchange revaluation, non-cash or incremental charges associated with acquisitions, amortization of acquisition-related intangible assets for acquisitions since the company’s initial public offering, costs related to share offerings, share-based compensation expense and other non-cash or one-time items.
The Company believes that these non-IFRS measures provide useful information to both management and investors in measuring financial performance. These measures do not have a standard meaning prescribed by IFRS and therefore, they may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with IFRS. These non-IFRS measures are provided as additional information to complement IFRS measures by providing further understanding of operations from management’s perspective. Accordingly, non-IFRS measures should never be considered in isolation nor as a substitute to using net income as a measure of profitability or as alternative to the IFRS consolidated statements of income or other IFRS statements.
There can be no assurance that the acquisition will close or that an equity or debt offering will be undertaken or completed in whole or in part or the timing of any such transaction. No securities will be offered or sold in the United States or to U.S. persons absent registration under the U.S. Securities Act of 1933 or the availability of an applicable exemption from such registration. This press release does not constitute a solicitation of an offer to purchase, or an offer to sell, securities in the United States or elsewhere. Closing of the acquisition is not conditional on the completion of any of the foregoing.
This press release includes forward-looking statements within the meaning of applicable securities laws, including with respect to the timing and completion of the transaction (including financing thereof), the anticipated benefits of such transaction, including, among others, potential revenue growth, increased baseball/softball market share, the timing and scope of anticipated synergies and operational efficiencies, the effective acquisition multiple and accretion (which may be impacted by the offering price of any equity offering and other final financing arrangements), expectations regarding a counter- seasonal revenue stream to the Company’s existing revenue stream and the successful expansion of the Easton Baseball/Softball apparel business.
The pro forma information set forth in this press release should not be considered to be what the actual financial position or other results of operations would have necessarily been had the Company and Easton Baseball/Softball operated as a single combined company, as, at, or for the periods stated.
Forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. The words “may”, “will”, “would”, “should”, “could”, “expects”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “likely” or “potential” or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. Forward-looking statements, by their nature, are based on assumptions, including those described herein and are subject to important risks and uncertainties. Many factors could cause the combined company’s actual results to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors: inability to introduce new and innovative products, intense competition in the equipment and apparel industries, inability to introduce technical innovation, inability to protect worldwide intellectual property rights and related litigation, inability to successfully integrate acquisitions, decrease in ice hockey, roller hockey, lacrosse and/or baseball/softball participation rates, adverse publicity, reduction in popularity of the NHL, NLL, MLB and other professional leagues in which our products are used, inability to maintain and enhance brands, reliance on third party suppliers and manufacturers, disruption of distribution chain or loss of significant customers or suppliers, cost of raw materials and shipping freight and other cost pressures, a change in the mix or timing of orders placed by customers, inability to forecast demand for products, inventory shrinkage or excess inventory, product liability claims and lawsuits, product recalls, compliance with standards of testing and athletic governing bodies, departure of senior executives or other key personnel, litigation and related matters, employment or union related matters, fluctuations in the value of certain foreign currencies in relation to the US dollar, inability to manage foreign exchange derivative instruments, general economic and market conditions, changes in consumer preferences and the difficulty in anticipating or forecasting those changes, natural disasters, as well as the factors identified in the “Risk Factors” section of Bauer’s Annual Information Form dated August 27, 2013 available on SEDAR at www.sedar.com.
Furthermore, unless otherwise stated, the forward-looking statements contained in this press release are made as of the date of this press release, and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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