Vista Open air Agrees to Purchase Fox Racing in $540M Deal

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Vista Outdoor Inc. (NYSE: VSTO), which owns 39 athletic and outdoor product brands, has agreed to acquire motocross and mountain bike equipment company Fox Racing to expand Vista Outdoor’s product offering.

According to the filings, the July 6 deal is valued at $540 million with the potential for an additional $50 million earnout based on Fox’s financial performance. The transaction will be funded 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.

The companies find that Fox Racing’s products and innovative gear complement Vista Outdoor’s portfolio of products and brands. The filings state that Fox Racing “grown 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. The deal strengthens Vista Outdoor’s outdoor product segment and adds approximately $350 million in revenue. Vista Outdoors also expects the transaction to be immediately accretive to earnings, excluding transaction and transition costs and inventory replenishment. Upon completion, Vista Outdoors expects its leverage ratio to be less than 1.5x, within its target of 1x to 2x.

“With the acquisition of Fox Racing, we continue the successful execution of our strategy of leveraging value-added acquisitions to extend our leadership position and capture long-term growth opportunities in the outdoor recreation space,” said Chris Metz, CEO of Vista Outdoor in a press release. “The acquisition of Fox Racing meets all of our financial and strategic acquisition criteria, even before considering the potential benefits of combining Fox Racing with our existing business. I am pleased that we have continued to add industry-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.”

Metz added: “Fox Racing fits perfectly into our portfolio and is known for high-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 synergistic with our existing action sports business unit which includes Bell Helmets, Giro, Blackburn, Krash, Copilot and Raskullz. Adding Fox Racing to our portfolio will allow us to target multiple consumer demographics in mountain and road biking, skiing/snowboarding and powersports.”

The filings say Fox Racing’s executive team, including CEO Jeffrey McGuane, will continue to lead the company after the deal closes. In addition, Fox Racing will become part of Vista Outdoor’s Outdoor Products segment and part of the new Outdoor Products Company upon completion of the previously announced separation, under which Vista Outdoor splits its Outdoor Products and Sporting Products segments into two independent segments. listed companies.

The transaction is expected to close in the second quarter of 2023, subject to certain customary closing conditions and regulatory approvals.

Fox Racing’s legal advisor is Ropes & Gray LLP and its financial advisor is Robert W. Baird & Co. Vista Outdoor’s legal advisor is Reed Smith LLP and its financial advisor is Morgan Stanley & Co. LLC. In addition, JPMorgan Chase Bank, NA is advising Vista Outdoor on the financing and is acting as Joint Lead Arranger and Bookrunner in conjunction with Capital One, NA, and Cravath, Swaine & Moore LLP is acting as Vista Outdoor’s legal counsel in connection with the financing for the Deal .

Prior to the announcement, Vista Outdoor stock was valued at $29.52 on July 5. When it was announced on July 6th, the stock was valued at $26.94. A few days later, on July 12, the stock closed at $26.80.