Bass Pro Shops to Purchase Competitor Cabela’s for $65.50 a Share
Monday morning, national outdoors retailer Bass Pro Shops announced it is purchasing competitor Cabela's for $65.50 a share (NYSE: CAB). Cabela's stock price last Friday closed at $55.05, and shot up to $62.98 a share by 9:30am Eastern Time/ 8:30am Central Time on Monday.
According to Bass Pro Shops, the approximate value of the transaction will be $5.5 billion.
In an open letter to Bass Pro Shops employees, Johnny Morris said, "Under this agreement our company will remain private with a long-term view to do what is best for our people, our customers and to maintain our steadfast support for conservation. While we are excited to align forces with Cabela’s, it must be noted that today's announcement is only the first step in the process.
"The transaction is expected to close in the first half of 2017, subject to the customary conditions and reviews. Until that time both businesses will continue to operate as separate, independent companies."
Cabela's currently has one location in Lubbock (pictured), plus five more Texas locations near Waco and the Metroplex. Bass Pro Shops has seven Texas locations scattered around Round Rock, San Antonio, Houston, the Valley and the Metroplex.
"Today's announcement marks an exceptional opportunity to bring together three special companies with an abiding love for the outdoors and a passion for serving sportsmen and sportswomen," said Johnny Morris, founder and CEO of Bass Pro Shops. "The story of each of these companies could only have happened in America, made possible by our uniquely American free enterprise system. We have enormous admiration for Cabela’s, its founders and outfitters, and its loyal base of customers. We look forward to continuing to celebrate and grow the Cabela’s brand alongside Bass Pro Shops and White River as one unified outdoor family.”
"Cabela’s is pleased to have found the ideal partner in Bass Pro Shops," said Tommy Millner, Cabela’s Chief Executive Officer. "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. In addition to providing significant immediate value to our shareholders, this partnership provides a unique platform from which our brand will be extremely well positioned to continue to serve outdoor enthusiasts worldwide for generations to come."
"This opportunity would not be possible without the contributions of the many wonderful Cabela’s, Bass Pro Shops and White River team members,” Morris said. “All three companies are blessed to have been built by the extraordinary efforts of many tremendously talented, dedicated people throughout our respective histories, and we're thrilled to consider what the combined team can achieve going forward.”
Additional Information Provided by Bass Pro Shops & Cabela's:
Following the closing of the transaction, Bass Pro Shops intends to celebrate and grow the Cabela’s brand and will build on qualities that respective customers love most about Cabela’s and Bass Pro Shops. In addition, Bass Pro Shops recognizes the strength of Cabela’s CLUB Loyalty program and intends to honor Cabela’s customer rewards and sees potential over time to expand the program in the combined company.
Bass Pro Shops appreciates and understands the deep ties between Cabela’s and the community of Sidney, Nebraska. Dick, Mary and Jim Cabela founded their company in Sidney in 1961, and the company has flourished with its base of operations there ever since. Bass Pro Shops intends to continue to maintain important bases of operations in Sidney and Lincoln and hopes to continue the very favorable connections to those communities and the Cabela’s team members residing there.
Bass Pro Shops Founder and CEO Johnny Morris will continue as CEO and majority shareholder of the new entity, which will remain a private company with a continuing long-term view of supporting the industry and conservation. Morris earned a reputation as a leading retailer and conservationist. In 2008, the National Retail Federation named him as Retail Innovator of the Year. In 2015, the same organization named him as one of 25 People Shaping the Future of Retail in America. In 2012, The Association of Fish and Wildlife Agencies named Morris Citizen Conservationist of the Year.
“Conservation is at the heart and soul of Bass Pro Shops. 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.”
Bass Pro Shops is proud to have secured preferred equity financing from the Merchant Banking Division of Goldman Sachs and Pamplona to facilitate the transaction. Goldman Sachs has committed $1.8 billion and Pamplona has committed $600 million for a total preferred financing commitment of $2.4 billion.
The Merchant Banking Division of Goldman Sachs is one of the leading private equity investors in the world, focusing on assisting large, high-quality companies with best-in-class management teams to achieve their growth objectives. The division brings significant experience and a strong track record of success in supporting industry-leading founder-led businesses. Pamplona Capital Management is a New York and London based specialist investment manager established in 2005. Pamplona is currently managing its fourth private equity fund, Pamplona Capital Partners IV, LP, which was raised in 2014. Pamplona invests long-term capital across the capital structure of its portfolio companies in both public and private market situations.
The transaction provides Cabela’s shareholders with a premium of 19.2% to Cabela’s closing share price on Sep. 30, 2016, the day prior to announcement of the transaction, 39.7% to the closing share price on Dec. 1, 2015, the day before Cabela’s announced its exploration of strategic alternatives and 57.1% to the 90-day volume weighted trading average prior to Dec. 1, 2015. Immediately prior to closing, Capital One will acquire certain assets and assume certain liabilities of Cabela’s World’s Foremost Bank. The cash proceeds from this transaction will remain with Cabela’s until it is acquired by Bass Pro Shops.
The transaction agreements were unanimously approved by Cabela’s Board of Directors following a comprehensive review of strategic and financial alternatives.
The transaction, which is expected to close in the first half of 2017, will be completed through a cash merger and is subject to approval by Cabela’s shareholders, as well as regulatory approvals and other customary closing conditions.
J.P. Morgan served as exclusive financial advisor to Bass Pro Shops and Latham & Watkins served as Bass Pro Shops’ legal counsel, with expert assistance from O’Melveny & Myers. Goldman, Sachs & Co. served as financial advisor to The Merchant Banking Division of Goldman Sachs and Davis Polk & Wardwell LLP served as legal advisor. Goldman, Sachs & Co. also served as advisor to Bass Pro Shops on the bank transaction, and Morrison & Foerster served as legal counsel. BofA Merrill Lynch, Wells Fargo Securities LLC, Citigroup Global Markets Inc., RBC Capital Markets, UBS Securities LLC, and Goldman Sachs are providing debt financing to support the transaction.
Guggenheim Securities served as exclusive financial advisor to Cabela’s and Sidley Austin LLP and Koley Jessen P.C., L.L.O. served as Cabela’s legal counsel.
The Kessler Group and Credit Suisse acted as financial advisers to Capital One and Wachtell, Lipton, Rosen & Katz and Chapman and Cutler acted as legal advisers.