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Johnny Morris: It’s not determined if the stores would remain separately branded.
Johnny Morris: It’s not determined if the stores would remain separately branded.

Bass Pro takes rival Cabela’s in $5.5B deal

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Bass Pro Shops has landed its biggest catch yet in the form of a $5.5 billion acquisition of rival outdoor retailer Sidney, Neb.-based Cabela’s Inc. (NYSE: CAB), taking the publicly traded company private in the process.

Although the deal announced Oct. 3 and approved by both companies boards awaits regulatory approval before it’s expected to finalize in the first half of 2017, a few of the growth factors already are known.

The acquisition would nearly double Bass Pro Shops’ employees, adding 19,000 staff to the Springfield company’s 20,000 total. Also, Bass Pro Shops’ base of 99 stores and Tracker Marine centers via White River Marine Group would add 85 Cabela’s locations in the United States and Canada. Company officials have not determined whether the stores would remain separately branded after the transaction, and Morris was not immediately available for comment.

In an open letter from Bass Pro Shops founder Johnny Morris to employees dated the day of the announcement, the company owner said the deal was a strategic fit, joining Bass Pro Shops’ fishing and boating background to Cabela’s’ hunting brand.

“In my view, this really is a once in a lifetime opportunity for both of our companies and clearly provides the foundation to create a best of the best shopping experience for all outdoor enthusiasts worldwide for generations to come,” Morris said in the letter. “I truly believe combining our two companies in this transaction will benefit our collective associates and vendors while enabling us to enhance our service and expand our products to better serve our valued customers.”

While the deal will have widespread implications for both retail empires, the effects are being felt in circles outside Bass Pro’s pond. Namely by Cabela’s investors who hold 68.5 million outstanding shares. Under the terms of the deal, Bass Pro would pay shareholders $65.50 per share. The price represents a 19.2 percent premium over its closing price of $54.94 on Sept. 30, the last day the market was open prior to announcing the deal.

However, a local investment club known as the Hillbillies of Wall Street, stand to make roughly 29.4 percent on the deal, having made a play for Cabela’s stock six weeks ago based on the news that a buyout was being explored.

“Mostly, kind of a gut feeling and consensus had been building,” said David Ransin, owner and attorney of Ransin Injury Law who helped found the club in 1998. “Given the news reports, the status of the market and the shares, the timing just felt right. We went long and tried it.”

Local investor pond
The rumor that Bass Pro planned to buy its biggest rival in the outdoor retail industry was reported first by Reuters in November. Ransin said the nine-member HOWS – the group’s acronym, stylized after a Wall Street ticker symbol – discussed for about six months before purchasing an undisclosed number of Cabela’s shares on Aug. 22. At that time, the price was $50.60 per share.

“We make buy-and-hold investment decisions and also what we call flyers,” Ransin said. “This was kind of a flyer – a gamble, because it had been in the news for quite a bit of time – and it paid off. If the acquisition didn’t come about for six months, we’d be content to hold on to it. We had no reason to expect it would happen this quickly.”

The Bass Pro-Cabela’s deal isn’t the group’s biggest payday. But Ransin said it has had the quickest turnaround. The group’s portfolio since 2009 is up about 65 percent.

Ransin said the group’s payout on Cabela’s remains contingent on the deal receiving regulatory approval, including the Federal Trade Commission’s inspection of antitrust laws. “Many of these can fall apart after they are announced,” he said.

Over 180 stores in the combined company compares to 162 stores by the nearest competitor, Gander Mountain Co.

Billionaire buyer
With Cabela’s shareholders including the Hillbillies still to approve the buyout, Bass Pro founder Morris also is gaining some recognition for his personal wealth.

On Oct. 4, the day after announcing the acquisition agreement, Forbes listed Bass Pro’s Morris No. 148 on the company’s list of the 400 wealthiest Americans. The 68-year-old Morris, whose net worth is estimated at $3.9 billion, also ranked No. 96 in the self-made category and placed No. 403 among the Forbes’ list of the world’s billionaires.

The acquisition of Cabela’s would add a $4 billion revenue stream to Morris’ homegrown empire, although the companies will remain separate until the deal is finalized. In July, Cabela’s reported second-quarter net income of $37.8 million on $929.9 million in quarterly revenue, and Bass Pro produces annual revenue of at least $3 billion, according to Forbes.

To finance the purchase, Bass Pro secured $1.8 billion in preferred equity financing through Goldman Sachs Group Inc. (NYSE: GS) and $600 million from Pamplona Capital Management LLC. Debt financing is serviced by Goldman Sachs, along with Bank of America Merrill Lynch, Wells Fargo Securities LLC and UBS Securities LLC, according to a news release from Bass Pro.

In his letter to employees, Morris noted Cabela’s shares a similar origin with Bass Pro Shops, which began with Morris selling lures from a section of his father’s Brown Derby liquor store.

“Dick, Mary and Jim Cabela started the company at the family kitchen table when Dick decided to place an ad to sell fishing flies,” Morris wrote. “Bass Pro Shops has every intention of celebrating and growing the Cabela’s brand.”

Cabela’s launched an initial public offering in 2004 that generated roughly $150 million. Ten years later, the family ranked No. 170 on Forbes’ list of America’s richest families with roughly $1 billion in net worth.

Members of both companies rewards programs and credit card users would be unaffected by the change according to a news release accompanying Morris’ letter. Bass Pro plans to enter a multiyear partnership with Capital One Financial Corp. (NYSE: COF) after the deal closes, and Capital One would service Cabela’s credit card business and continue to operate the Cabela’s Club service center in Lincoln, Nebraska.

Web Producer Geoff Pickle contributed.

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