Continuing its strategy of expansion through acquisition, athletic supplies distributor Collegiate Pacific scooped up the majority share of a major rival, Farmer’s Branch, TX-based Sport Supply Group (SSG), from Emerson Radio Corp. for $32 million in cash.
As part of the deal, Terrence M. Babilla, Sport Supply Group’s chief operating officer, will retain that position and take on the role of president. Michael J. Blumenfeld, founder/chairman/CEO of Dallas-based Collegiate Pacific — who had founded SSG in 1991 — assumes the role of chairman/CEO of Sport Supply, formerly held by Emerson Radio chairman/CEO Geoffrey Jurick.
SSG, whose catalog titles include BSN Sports and US-Games, “never really fit in with Emerson,” says David Solomon, managing director/partner at New York-based investment bank Goldsmith Agio Helms. Parsippany, NJ-based Emerson is a manufacturer/marketer of televisions, microwave ovens, and other home electronics.
For fiscal 2004, SSG posted sales of $90 million, a 7% increase from the previous year. The company’s net income for the year totaled $2.1 million, compared with a loss of $1.7 million a year earlier. The combined customer count of SSG and Collegiate Pacific totals more than 175,000.
Worth the price
SSG promises to supplement Collegiate Pacific’s existing market presence. Whereas the $100 million-plus Collegiate Pacific sells primarily to institutional and team dealers, SSG reaches the elementary/middle school markets and the out-of-school private youth sport leagues. It also participates in the public-school bid system and provides Websites for institutional, team and consumer purchasing.
“Collegiate Pacific is filling a hole in the elementary and middle school arena,” Solomon says. “Collegiate can drive higher volumes of its existing products through its sourcing and distribution network, by servicing the new and middle-school markets.”
In fact, Solomon says, Collegiate Pacific may well be able to double Sport Supply’s EBITDA over time. It paid a multiple of 15.1 based on trailing 12 months EBITDA as of March, for SSG, Solomon says: “Collegiate paid a great price, but they probably felt it was worth it.”
SSG’s stock price saw a boost immediately once word of the deal emerged. Between December 2004 and April 2005, the stock was trading at around $2.75 per share, Solomon says. But when the deal hit, the stock price was trading at $3.75. “So before the stock moved up in May, the company was trading at an enterprise valuation of 6.1 times trailing 12-month EBITDA,” he explains. “When the stock moved up prior to announcement, the enterprise valuation was 8.6 times EBITDA.”
During the past year Collegiate Pacific had made a number of smaller purchases, buying regional distributors such as Salkeld Sports and Orlando Team Sports.