UPDATE: Privately held outdoor retailer Bass Pro Shops has agreed to acquire rival Cabela’s for $65.50 per share in cash, or approximately $5.5 billion, the companies announced Monday. The bid outpaced a competing offer from private equity firm Sycamore Partners, which is working with credit company Synchrony Financial, according to Reuters.
UPDATE: Goldman Sachs committed $1.8 billion and Pamplona committed $600 million in secured preferred financing to enable Bass Pro Shops to complete the purchase. Upon closing the deal, Bass Pro Shops will enter a multi-year partnership agreement with banking giant Capital One, which will service Cabela’s co-branded credit card.
UPDATE: Global law firm Sidley Austin LLP advised Cabela’s in its sale to Bass Pro Shops for approximately $5.5 billion, according to an email from a spokesperson at Sidley Austin. Cabela's has been under pressure to sell since investor Elliott Management last year disclosed an 11% stake in the Sidney, NE-based company.
"Cabela’s is pleased to have found the ideal partner in Bass Pro Shops," Tommy Millner, Cabela’s CEO, said in a statement. "Having undertaken a thorough strategic review, during which we assessed a wide variety of options to maximize value, the board unanimously concluded that this combination with Bass Pro Shops is the best path forward for Cabela’s, its shareholders, outfitters and customers."
The similarities are obvious. Both Cabela’s and Bass Pro Shops employ big, destination-like stores focusing on all things outdoors, operating competing locations in the U.S. and Canada. Bass Pro Shops, founded in 1971, also runs restaurants with wild game and fish on the menu in some stores; Cabela’s, founded in 1961, is known for its huge taxidermy displays, shooting galleries and related tourist attractions.
But unlike Bass Pro Shops, Cabela’s has been struggling for some time, and last year scaled back expansion plans after discovering that its new superstores were taking sales from existing ones. But in its latest earnings report, a sliver of optimism resurfaced: In July, the retailer posted its first quarter of positive comparable store sales since the third quarter of 2013. The increase was "attributable to strength in firearms and shooting related categories as well as the camping, powersports, and fishing categories," according to a company press release.
The fact that Cabela’s sells guns also emerged as a controversial aspect of its business in light of increasing mass shootings in the U.S. Some private equity firms have balked at gun-related investments, though firearm sales have helped bolster the retailer's financial results.
Moody's Investment Service Monday said the merger carries both potential, and some risks.
“Bass Pro’s proposed deal to acquire Cabela’s combines premier brands in the outdoor sporting goods industry with complementary business philosophies, product offerings and geographic footprints," Moody’s retail analyst Mike Zuccaro said in an emailed statement. “However, the potential deal brings with it significant integration risk, and the company’s final capital structure is unclear given that expected proceeds from Capital One’s purchase of certain financial services assets and assumed liabilities have not been disclosed.”
Looking ahead, the Bass Pro Shops/Cabela's deal will likely invite scrutiny from the Federal Trade Commission on antitrust grounds, considering the dominance of both retailers in the outdoor and sporting goods space. The FTC of late has burnished a reputation for blocking retail mergers, most recently ending a Staples/Office Depot merger attempt and pressuring Walgreens to agree to shutter more stores if it goes through with plans to take up rival drugstore Rite Aid.
Staples and Office Depot cited Amazon’s move into the office supplies space as proof of adequate competition, but that argument that didn’t sway the judge; it's unclear how Cabela's and Bass Pro Shops might argue their right to merge, but Amazon is not a big player in the outdoor gear space and it doesn’t sell guns.