Sports equipment merchant Sport Supply Group announced today it entered into a definitive merger agreement to be acquired by an affiliate of ONCAP Management Partners, the mid-market private equity business of Onex Corp.
According to the deal, all outstanding shares of common stock of Sport Supply Group, other than those held by certain participating stockholders, will be acquired for $13.55 per share in cash. CBT Holdings, an affiliate of private investment firm Andell Holdings, which beneficially owns about 16% of Sport Supply Group’s outstanding common stock, and certain members of Sport Supply’s management team, have entered into agreements with ONCAP to exchange their Sport Supply Group common stock and options, as applicable, for equity of the purchaser entity.
Carlson Capital, which beneficially owns about 22% of Sport Supply Group’s outstanding common stock, and CBT have each entered into a voting agreement with ONCAP and agreed to vote their shares in favor of the adoption of the merger agreement.
Sport Supply Group, formerly Collegiate Pacific, manufactures and distributes sporting goods and branded team uniforms to the institutional and team sports market. Chris Kampe, managing director with investment firm Tully & Holland, said the multiple ONCAP paid for Sport Supply Group is a 7.2 times earnings before interest, taxes, depreciation and amortization (EBITDA).
Generally speaking, Kampe says ONCAP seeks to acquire businesses with EBITDA in excess of $8 million and make an initial equity investment of more than $20 million. “ONCAP believes that restaurant and specialty retail industries present attractive niches and they are particularly attracted to distressed assets with a requirement for capital,” he says.
What’s more, Kampe says officials at ONCAP like retail and restaurants at this point in the business cycle, “because they believe it’s the right time for unit growth for the right concepts with much more attractive real estate availability.”
While the sporting goods sector has suffered, Kampe says Sport Supply Group has flourished because it sells to the institutional and team markets–colleges, universities, schools–and not the consumer. “SSG has also been trading at a comparatively low valuation, which makes it an interesting value investment,” he says.
The transaction is expected to close in the second or third quarter of this year. The terms specify that the special committee of independent directors can solicit superior proposals from third parties for a period of 30 days. If Sport Supply Group’s board terminates the merger as a result of accepting a superior proposal, Sport Supply must pay ONCAP a termination fee of either $3 million or $6 million.