Fox Racing to be bought by Vista Out of doors

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Vista Outdoor Inc., based in Anoka, Minnesota, announced today that it has entered into a definitive agreement to acquire Fox Racing, based in Irvine, California. The purchase price is $540 million, with the potential for an additional $50 million in earnings based on Fox Racing’s financial performance.

For 50 years, Fox Racing has been a leading voice in the motocross and adventure community, with a dedicated fan base and a talented group of employees who embody the brand’s mission to “Honor yesterday, conquer today and conquer tomorrow.” invent”.

Fox Racing’s long history of creating innovative gear that helps racers and explorers reach new heights is a perfect fit with Vista Outdoor’s existing portfolio of leading outdoor brands. Fox Racing grew net sales at a compound annual growth rate of approximately 20% from calendar year 2019 through 2021 and is expected to grow beyond that in calendar year 2022.

“Over the past four years we have built a diversified portfolio of iconic outdoor brands led by a proven leadership team that continues to perform well and deliver strong results for our shareholders,” said Chris Metz, CEO of Vista Outdoor. “The acquisition of Fox Racing continues the successful execution of our strategy of expanding our leadership position through value-added acquisitions and capitalizing on long-term growth opportunities in the outdoor leisure space. The Fox Racing acquisition meets all of our financial and strategic acquisition criteria, even before considering potential benefits from combining Fox Racing with our existing business. I am pleased that we have continued to be able to add category-leading brands such as Fox Racing to our portfolio while maintaining a strong balance sheet and reinvesting in our existing business to drive organic growth.

“Fox Racing fits perfectly into our portfolio with a solid reputation for quality helmets, protective gear and apparel for motocross and mountain biking. Motocross and mountain biking are growing and familiar categories for Vista Outdoor. Fox Racing is a synergy with our existing Action Sports business unit which includes Bell Helmets, Giro, Blackburn, Krash, Copilot and Raskullz. The addition of Fox Racing to our portfolio will allow us to target multiple consumer demographics in mountain and road biking, skiing/snowboarding and powersports. We expect Fox Racing and our legacy teams will find numerous opportunities to leverage core competencies, improve supply chain efficiency and resilience, and better serve our customers and consumers to drive future growth. We believe the combined platform will empower each company will make them stronger and more profitable tomorrow they are today, while enabling us to continue to provide long-term returns to our shareholders will.”

Fox Racing CEO Jeffrey McGuane will continue to lead the company once the acquisition is complete, as will the entire Fox Racing leadership team.

“We are excited to join the Vista Outdoor family,” said McGuane. “Together we can leverage the legacy of our leading brands, leverage new supply chain synergies, expand our deep and established channels, and appeal to an expanded customer base. Combined with improved access to capital for innovation and scale, we believe this transaction is a win. Profit for everyone involved. Vista Outdoor’s leadership team has demonstrated that they have an effective, repeatable acquisition model in place, making Vista Outdoor the clear acquirer of choice for Fox Racing. It’s not often that an acquired company can stay true to its culture and customer base. At the same time, we take advantage of Vista Outdoor’s Centers of Excellence, extensive retail partnerships, innovation engines and a leadership team that enables a founder mindset and a results-driven culture. Needless to say, we’re excited about this next chapter for Fox Racing.

Fox Racing will be part of Vista Outdoor’s Outdoor Products segment and will be incorporated into the new Outdoor Products Company upon completion of the previously announced separation.

Details of the Proposed Transaction

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Vista Outdoor has agreed to pay a gross purchase price of $540 million upon meeting certain EBITDA targets, subject to certain customary closing adjustments and without contingent incentives of up to $50 million. For calendar year 2022, Fox Racing’s full year net sales and Adjusted EBITDA are expected to be approximately $350 million and $55 million, respectively. Vista Outdoor expects the transaction to have an immediate earnings impact, excluding transaction costs, transition costs and inventory replenishment.

Vista Outdoor expects to complete this acquisition through a combination of a $600 million asset-based revolving credit facility, which will replace Vista Outdoor’s existing asset-based revolving credit facility, and a $350 million secured loan facility fund US dollars. Vista Outdoor expects to close the transaction in the second fiscal quarter of fiscal 2023, subject to receipt of regulatory approvals and other customary closing conditions. Upon closing of this transaction, Vista Outdoor’s leverage ratio is expected to be less than 1.5 times, well within its target leverage ratio of 1 to 2 times.

Vista Outdoor will provide updated fiscal 2023 guidance when it reports fiscal 2023 first quarter results on July 28, 2022, matching historical cadence.

Robert W. Baird & Co. acted as financial advisor and Ropes & Gray LLP acted as legal advisor to Fox Racing.

Morgan Stanley & Co. LLC served as financial advisor to Vista Outdoor and Reed Smith LLP as legal advisor in connection with the transaction. JPMorgan Chase Bank, NA is also advising Vista Outdoor on the financing and is acting as Joint Lead Arranger and Bookrunner together with Capital One, NA, and Cravath, Swaine & Moore LLP acted as Vista Outdoor’s legal counsel in connection with the financing of the transaction.