Sports Authority Inc., which is preparing to file for bankruptcy, has discussed selling stores and intellectual property to rival chain Dick’s Sporting Goods Inc. and other parties, according to two people familiar with the situation.
The Dick’s transaction is one of several options being considered, said the people, who asked not to be identified because the discussions are private. Modell’s Sporting Goods also is discussing buying some of the stores, according to the people. It’s also not clear how many locations might be involved in a potential deal, which would take effect after a Chapter 11 filing.
Sports Authority, once the largest sporting-goods retailer in the U.S., is heading toward default after years of losing ground to competitors. The Englewood, Colorado-based chain missed a Jan. 15 interest payment on some of its debt and failed to make the payment during a 30-day grace period.
The company has been holding talks with lenders such as TPG on a deal to reorganize in Chapter 11 bankruptcy proceedings, Bloomberg News reported in February. It also was mapping out a plan to close as many as 200 of its more than 450 stores under the bankruptcy plan, people familiar with the situation said at the time.
Sports Authority declined to comment, while Dick’s and Modell’s didn’t immediately respond to requests for comment.
Acquiring Sports Authority’s stores and branding would give Dick’s the option of continuing to operate the locations or shutting them down, reducing competition in the sporting-goods business. A decade ago, the two companies were neck-and-neck for the market lead in the industry. But after years of sluggish growth, Dick’s eclipsed its competitor.
Dick’s shares have climbed 22 percent this year, outpacing the Standard & Poor’s 500 Index. The stock rose 1.1 percent to $42.95 as of 10:41 a.m. on Tuesday in New York.
Sports Authority, which has at least $643 million in debt, also has struggled to compete with newer market entrants, such as Lululemon Athletica Inc., Gap Inc.’s Athleta and Amazon.com Inc. To help the chain operate through the holiday season, TPG provided Sports Authority with $70 million of a $95 million asset-backed loan late last year, a person said.
Sports Authority was acquired by a group led by private equity firm Leonard Green & Partners LP for $1.3 billion in 2006. The subordinated bondholders are being advised by Houlihan Lokey Inc. The company’s advisers are Rothschild & Co., FTI Consulting Inc. and Gibson Dunn & Crutcher LLP.