Bass Pro reportedly seeks financing options

Every good fisherman knows a good hook is not enough.

Bass Pro Shops owner and founder John Morris knows if he wants to keep luring customers and spreading his retail destination brand across the country, he’ll need someone else’s bait on the line. And now he’s exploring funding options.

According to a recent Wall Street Journal report, the Springfield-based seller of fishing and hunting equipment hired New York merger-and-acquisition advisory Moelis & Co. (NYSE: MC). The publication cited “people familiar with the matter” regarding Bass Pro’s relationship with Moelis.

Beyond advising clients on M&As, the investment banking and advisory firm with $500 million in annual revenue assists corporations with recapitalizations, restructurings and other corporate financing. Moelis spokeswoman Kate Pilcher declined to answer questions regarding Bass Pro, and spokeswomen with the retailer also did not address the matter.

Bass Pro currently operates 68 retail stores across the U.S. and Canada, with another 25 in various stages of development. Additionally, the company has 20 Tracker Marine boat sales centers.

This year, four Bass Pro stores came on line, making splashes in Cary, N.C.; Hooksett, N.H.; Anchorage, Alaska; and Bristol, Tenn.

Notable projects under development include a 70,000-square-foot store that will be part of a $2 billion mixed-use development in Sayreville, N.J. That projects features a $12.3 million loan approved by a state agency. In Memphis, Tenn., Bass Pro is working with developers on a highly publicized renovation of the Memphis Pyramid. That store, which had been slated for completion in late 2014, is drawing on $215 million in bonds issued by the Downtown Memphis Commission. In Sarasota, Fla., Bass Pro announced this spring its fifth store currently in development in the Sunshine State. The 80,000-square-foot Outpost store, which is expected to anchor a 260,000-square-foot mixed-use development, would be the company’s 14th in Florida when complete in 2016.

The growth of the company has been fueled, in part, by a willingness among municipalities to offer incentives and among developers who build out the stores and lease the space to Bass Pro.

“That model works well as long as the local governments are willing to play ball, [and] as long as you have developers who have the resources to invest to construct the buildings,” said Jeff Jones, an assistant professor of finance at Missouri State University, adding Bass Pro’s reported relationship with Moelis could indicate a change in philosophy. “One possibility is that they have exhausted all of those markets.”

Given the number of stores Bass Pro plans to open and a reported interest in exploring its funding options, Jones said it’s possible the company is considering going public.

“Often when a company gets to a certain size, the private market for financing becomes insufficient,” Jones said. “Doing an equity (initial public offering) would be a way to raise a lot of money in a relatively short period of time.”

Project financing could be growing increasingly complex, Jones said, given Bass Pro’s history of long-term leases with its developers around the country. He said such leases can show up on financial statements as capital leases, or liabilities. And if profits for the private company aren’t outpacing the debt it may be incurring as it develops more stores, that could make deals harder to come by.

“If the retained profits of the business do not grow as fast as the expansion of debt, the company would become more and more leveraged. One of the ways you may have to remedy that is to have additional owner contributions. And the chances of trying to raise equity from private sources – it is very unlikely that there’d be a sufficient amount,” Jones said. “That’s when they might decide to go public.”

Going public can generate big bucks.

According to MarketWatch.com, when Moelis & Co. went public earlier this year, it sold 6.5 million shares through its initial public offering, raising $162.5 million. The $25 stock has since grown to $34 per share by press time.

Forbes magazine estimated Bass Pro’s 2013 revenue at $3 billion and Morris’ net worth at $4.4 billion, making him No. 351 on its list of the wealthiest people in the world.

Bass Pro’s biggest competitor, Sidney, Neb.-based Cabela’s (NYSE: CAB), has roughly $4 billion in annual revenue from its more than 60 stores in operation nationwide.

In Cabela’s 2004 IPO, the company generated roughly $150 million, according to Forbes.[[In-content Ad]]