Unlikely Bedfellows: Redcats USA to Buy Sportsman’s Guide

May 06, 2006 5:19 AM  By

New York-based multititle cataloger Redcats USA is turning its attention to the outdoors. On May 5 it announced a definitive agreement to acquire South St. Paul, MN-based The Sportsman’s Guide for $31 a share, or roughly $265 million. Sportman’s Guide had sales of $285.1 million in 2005.

The U.S. division of French direct marketing powerhouse Pinault-Printemps-Redoute (PPR), Redcats USA sells primarily women’s apparel and home products. Its lone title outside of those product categories is the KingSize catalog of clothing for big-and-tall men. Its other titles include Chadwick’s of Boston, La Redoute, Roaman’s, and BrylaneHome.

The Sportsman’s Guide specializes in outdoor gear and sporting goods. In June 2004 its expanded its offerings by purchasing The Golf Warehouse (TGW). This past March it entered the baseball and softball markets with two new Websites, www.BaseballSavings.com and www.SoftballSavings.com. (See “New Ballgame for Sportsman’s Guide.”)

William Bartkowski, a spokesperson for The Sportsman’s Guide, declined comment about the deal. Similarly, Pat Cross, vice president of corporate public relations and communications for Redcats USA, declined comment on the transaction: “At this time we are going to limit our response to the information that is included in the press release.”

David Solomon, managing director for New York-based investment banking firm Goldsmith Agio Helms, says he was surprised by the unlikely alliance between an apparel cataloger and an outdoor cataloger, although he notes, “Redcats CEO Eric Faintreny has been talking about moving away from his dependence on apparel.”

PPR said earlier this year that it was interested in adding to its family of Redcats USA titles. Fred Anderson, founder of South Orange, NJ-based investment bank Anderson Direct, says the acquisition could be the first step in an overall strategy to compensate for the pending loss of Redcats’ Lane Bryant catalog of plus-size women’s apparel. The trademark to that title is scheduled to revert back to Bensalem, PA-based retailer Charming Shoppes in 2007. Charming Shoppes has owned and operated the Lane Bryant stores since 2001. Its acquisition of multititle mailer Crosstown Traders last year was, as Charming Shoppes chairman/CEO/president Dorrit Bern said at the time, “a key step in our preparation for the launch of our own catalog.”

Nonetheless, “Redcats USA is a female demographic, and The Sportsman’s Guide is a male demographic,” Solomon says. “Redcats’ home and apparel business are probably 90% female. If you’re looking for cross-selling synergies and demographic, it’s not going to happen with this deal. They could leverage inhouse expertise on direct marketing and sourcing, but that’s about it. It’s a diversification. And companies do that when they feel they are running out of room for growth.”

Solomon estimates that Redcats USA paid about 12.8 times earnings before interest, taxes, depreciation, and amortization (EBITDA). He pegs the enterprise value—debt plus equity minus cash—at $250 million.

The deal is expected to close in the third quarter. Gregory R. Binkley, president/CEO of Sportsman’s Guide, said in the release: “We are pleased to make today’s announcement. We believe that the price is consistent with management’s goal of maximizing shareholder value, and we believe that Redcats USA represents a great fit for the company, its customers, associates, and managers.” Binkley and other members of The Sportsman’s Guide and The Golf Warehouse senior management have agreed to remain with the company after the merger.