April 15 (Bloomberg) -- Bauer Performance Sports Ltd., the first company to fix skate blades permanently to boots, plans to score in baseball after conquering the market for hockey gear.
Bauer, founded in Kitchener, Ontario in 1927, has boosted its share of the global hockey equipment-market to 53 percent from about 30 percent in 2008. The company has similar growth plans for baseball after closing a $330-million deal to buy Easton-Bell Sports Inc.’s baseball and softball unit, Chief Executive Officer Kevin Davis said.
“We have a very clear path of getting there with Easton,” Davis said in a telephone interview from the company’s Exeter, New Hampshire, headquarters. “We know how to do it and we’ve done this before.”
Bauer, which Nike Inc. sold to an investor group led by Kohlberg & Co. in 2008 for $200 million, has risen about 100 percent since it went public in 2011 and touched an intraday record of C$15.02 yesterday. The stock fell 0.3 percent to C$14.75 at 4 p.m. in Toronto today.
With the addition of Easton Baseball the company has completed seven acquisitions in the past six years worth more than $400 million, including Mission-ITech Hockey, lacrosse equipment maker Cascade Helmets Holdings Inc., and jersey apparel maker Inaria International.
Easton-Bell, based in Van Nuys, California and owned by Fenway Partners LLC and Ontario Teachers’ Pension Plan, is already the world leader in baseball and softball equipment, including bats, gloves and helmets, with a 28 percent market share, Davis said.
The deal to buy the baseball unit closed today, and will add to the company’s adjusted earnings per share in the first year of ownership, Bauer said. The combined businesses generated about $593 million in annualized sales based on trailing 12-month results for Bauer and Easton Baseball, the statement said.
Rivals in the baseball business include Berkshire Hathaway Inc.’s Fruit of the Loom Inc. which makes equipment through its Russell Brands LLC unit, including the Spalding brand. Rawlings Sporting Goods Co., a unit of Jarden Corp., says it’s the market leader in balls and gloves and has supplied Major League Baseball with official balls since 1977.
Kurt Hunzeker, a spokesman at St. Louis, Missouri-based Rawlings, declined to comment on the potential for increased competition from Bauer. Allison Goldstein and Shawn McBride at Ketchum Sports & Entertainment, which represents Russell Brands’s Spalding, couldn’t be reached for comment.
Bauer will continue to expand through acquisitions, Davis said.
“We have a very, very full deal pipeline,” he said, declining to identify potential targets or how much money the company expects to deploy. “We are presented with opportunities on a weekly basis.”
The acquisition of Easton Baseball, the company’s largest, is part of Bauer’s strategy of gaining share in a fractured market by buying brands that are already recognized by athletes as leaders in their sport and then expanding them through aggressive product development.
“This acquisition is a great fit with Bauer’s business model and is consistent with management’s aim of adding strong athletic equipment brands, with good technology in sports that require high-quality and innovative products,” Mark Petrie, an analyst at CIBC World Markets Inc., said in an April 10 note to clients.
The baseball and softball-equipment market has 10 to 12 major brands and is ripe for consolidation, Sabahat Khan, an analyst at RBC Capital Markets, said in an April 1 note to clients.
Davis also sees room to expand internationally, with Russia one of their fastest growing hockey markets and baseball interest rising in Japan and Latin America. Almost 75 percent of Bauer’s revenue currently comes from North America.
The conflict between Russia and Ukraine, which has led to sanctions against Russia from the U.S., Canada and others is unlikely to impact Bauer, Davis said.
“Despite the political climate happening there, kids are going to play hockey this upcoming season,” Davis said during the company’s third-quarter earnings call last week.
Bauer reported an adjusted loss of 11 cents a share in the third quarter, ahead of analysts’ estimates for a 12-cent loss Sales climbed 13 percent to $62.2 million, ahead of the average forecast for $60.6 million, according to data compiled by Bloomberg.
Bauer is introducing the latest version of its Re-Akt hockey helmet later this year, Davis said. The helmet, which comes amid rising awareness of concussions in hockey, is designed to protect players from both direct and rotational forces and includes special padding exclusive to Bauer.
Bauer’s debt level is “a bit stretched” following the Easton deal, Trevor Johnson, an analyst with National Bank Financial, said in an April 10 phone interview.
Bauer’s debt ratio will be about five times earnings before interest, taxes, depreciation and amortization after the Easton Baseball deal, Davis said. The company announced after the deal it planned to lower this to least four times through an equity issue in the summer, and forecasts a return to normal levels within the next 24 months.
The company plans to finance the Easton deal through a combination of a $200 million revolving credit facility and $450 million in senior secured loans.
“This one’s going to take a little bit of time to make sure we get it right,” Davis said. “We’ve got lots to do but it is not going to slow us down from continuing to seek future acquisitions.”
To contact the editors responsible for this story: Jacqueline Thorpe at email@example.com