A consortium led by Bass Pro Shops has reportedly reached a deal to acquire rival American outdoor sports gear retailer Cabela’s in a transaction that could potentially interest antitrust regulators.
The consortium, which includes the private equity division of Goldman Sachs Group and Capital One Financial Corp, had earlier been reported to have offered an undisclosed amount over $4 billion for the leading outdoor sporting goods chain.
The bid had put the consortium in the lead to take over the running of Cabela’s, having surpassed another bid received from Sycamore Partners, which was bidding in collaboration with American credit card company Synchrony Financial. A deal was thought likely to be reached as early as this week.
Business Insiders has now revealed that a deal has been announced, valuing Cabela’s at $65.50 per share in cash. That put the value of the total deal at about $5.5 billion. The transaction is expected to be finalized in the first half of 2017.
The deal brings together two of America’s biggest outdoor gear retailers. This raises the possibility of an antitrust investigation being carried out.
JPMorgan served as Bass Pro’s sole financial adviser, while Guggenheim Securities was the exclusive financial adviser to Cabela’s. Preferred equity financing of for the deal was provided by the Merchant Division of Goldman Sachs Group and private equity firm Pamplona. Goldman Sachs provided $1.8 million while the New York-based Pamplona committed $600 million for a combined total of $2.4 billion in preferred financing.
Cabela’s and Bass Pro have been major go-to for outdoor enthusiasts in need of gear and equipment hunting and fishing for several decades. They have been able to maintain their relevance in recent years as all-in-one locations for shopping, entertainment and expert advice amid stiff competition from major online retailers, such as Amazon. They have also been driven at times by their hunting-gun businesses.
As a result of pressure from activist hedge fund Elliot Management Corp., Cabela’s had revealed last December that it would explore a variety of strategic options, including a potential sale.
Uncertainty over gun law changes has caused swings in Cabela’s gun sales, negatively affecting its revenue and profit. The retailer had a disappointing third quarter last year which it attributed to weak fall apparel and footwear sales.
A successful deal would enable Bass Pro Shops, which is headquartered in Springfield, Missouri, to improve its presence outside the U.S. Northeast. Most of its stores numbering around 100 are located in the region. On the other hand, the Nebraska-based Cabela’s has around 85 retail stores, most of which are in the Northwest. Both retailers maintain presence across the U.S., overlapping in states such as Missouri, Texas and Kansas.
Capital One Financial Corp reportedly has interest in acquiring Cabela’s credit card business known as World’s Foremost Bank. Reuters reports the business had almost two million accounts and around $5 billion and $502 million in loans and revenue respectively last year.
Cabela’s shares have gained 18 percent in 2016, following 30 percent drop in the two-year period through 2015.