Easton Baseball, Bauer Hockey File Bankruptcy With Sale Dealby and
Performance Sports Group assets to be sold in court auction
Fairfax Financial, Sagard Capital make offer of $575 million
Performance Sports Group Ltd., the owner of the Bauer and Easton brands, filed for bankruptcy protection as part of a deal to sell the hockey- and baseball-equipment business for at least $575 million.
Under a proposal filed in U.S. and Canadian courts Monday, Performance Sports would sell substantially all its assets at an auction with an opening bid of $575 million from Sagard Capital Partners and Fairfax Financial Holdings.
If no qualified competing offers come in, their “stalking-horse bid” will carry the day, pending court approval. There’s a $20.1 million breakup fee for the stalking horse should another bidder prevail.
Sagard is one of Performance Sports’ biggest shareholders, with a 17 percent stake, according to data compiled by Bloomberg. Another big investor, Brookfield Asset Management Inc., is considering its next steps, according to a person familiar with the matter.
Exeter, New Hampshire-based Performance Sports traces its roots to 1927 and the development of the first ice-skating boots with blades attached. The company blamed its troubles on a slowdown in sales, particularly in bats, and the liquidation of key customer Sports Authority Inc., the retailer that failed earlier this year. Performance Sports shares fell about 64 percent this year and it had delayed reporting earnings amid an internal investigation.
“Absent the legal protection afforded through the restructuring process, the company’s cash flow position would continue to deteriorate,” Performance Sports said in a statement.
The company will ask a judge in the U.S. for permission to borrow $386 million while in bankruptcy, according to the statement. The money will be used to refinance a $330 million loan and keep the business operating while it reorganizes. Performance Sports said it has about $489 million in secured debt, which is backed by collateral. It also listed at least $23 million in unsecured debt and undetermined claims related to litigation.
Shortly after Sports Authority filed for bankruptcy in March, Performance Sports wrote down anticipated sales that would have come from the chain and slashed its financial forecasts. Specialty retailers including athletic-goods stores such as Sports Authority and Eastern Mountain Sports have stumbled as consumers do more shopping online or at big-box stores.
In 2014, Performance Sports added more debt than it could handle in order to buy Easton Baseball for $330 million, the company’s chief restructuring officer, Brian Fox, said in a filing in federal court in Wilmington, Delaware. Since then, demand for baseball and softball equipment has fallen.
Performance Sports also faces probes by U.S. and Canadian securities regulators and a shareholder lawsuit accusing it of accounting manipulations and false or misleading statements, Fox said. Because the company failed to file audited financial statements by Oct. 28, it went into default on its senior debt, he said.
The bid by Sagard and Fairfax is designed to repay senior lenders, assume other liabilities and keep Performance Sports intact.
Bauer Hockey is the top seller of ice hockey equipment in the world, with 56 percent of the market, Performance Sports said in court papers. Easton has 19 percent of the North American market for baseball and softball-related sales.
The $575 million offer should give stockholders more than $3 a share in value, Rommel Dionisio, an analyst at Wunderlich Securities in New York, said in a note to clients.
“Given PSG’s powerful brand equity and leading market shares in major team sports categories, we believe there could be higher upcoming bids from strategic players as well,” he said.
Brookfield, Performance Sports’ second-largest shareholder, remains in discussions about potentially participating in the transaction, according to the person familiar with the matter. A decision on whether to participate in the takeover bid or the debtor-in-possession loan has yet to be made, the person said. A representative from Brookfield declined to comment.
The case is In re BPS U.S. Holdings Inc., 16-12373, U.S. Bankruptcy Court, District of Delaware.