Vista Outdoor Inc. (NYSE: VSTO), which owns 39 sporting and outdoor product brands, has agreed to acquire motorcross and mountain bike gear company Fox Racing in a deal said to expand Vista Outdoor’s product offering.
According to the filings, the July 6 deal is valued at $540 million with the potential for another $50 million earnout based on Fox’s financial performance. The deal will be financed via a combination of a $600 million asset-based revolving credit facility that will replace Vista Outdoor’s existing asset-based revolving credit facility and a $350 million secured term loan facility.
The companies note that Fox Racing’s products and innovative gear complement Vista Outdoor’s product and brand portfolio. The filings state that Fox Racing “grew net sales by a compound annual growth rate of approximately 20% from calendar year 2019 to 2021 and is expected to grow in excess of that in calendar year 2022. The deal strengthens Vista Outdoor’s outdoor products segment and adds approximately $350 million in revenue. Vista Outdoors also expects the transaction to be immediately accretive to earnings, not including transaction and transition costs as well as inventory step-up. Upon consummation, Vista Outdoors expects its leverage ratio to be less than 1.5 times, within its target of one to two times.
“With the acquisition of Fox Racing, we are continuing the successful implementation of our strategy to use accretive acquisitions to expand our leadership position and ability to capitalize on long-term growth opportunities in outdoor recreation,” Chris Metz, CEO of Vista Outdoor, said in a press release. “The Fox Racing acquisition meets all of our financial and strategic acquisition criteria, even before taking into account potential benefits from combining Fox Racing with our existing business. I am pleased that we have been able to continue to add category-leading brands like 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 is an ideal fit for our portfolio with a reputation 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 to 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 across mountain and road biking, skiing/snowboarding, and powersports.”
The filings state that Fox Racing’s leadership team, including CEO Jeffrey McGuane, will continue to lead the company after the deal closes. Additionally, Fox Racing will become part of Vista Outdoor’s Outdoor Products segment and will be part of the new Outdoor Products Company upon the completion of the previously announced separation, pursuant to which Vista Outdoor is separating its outdoor products and sporting product segments into two independent, publicly-traded companies.
The transaction is expected to close in Q2 2023 subject to certain customary closing conditions and regulatory approval.
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. Additionally, JPMorgan Chase Bank, N.A. is providing financing advice to Vista Outdoor and in conjunction with Capital One, N.A. are serving as joint lead arrangers and bookrunners and Cravath, Swaine & Moore LLP is serving as Vista Outdoor’s legal advisor in connection with the financing for the deal.
Prior to the announcement, Vista Outdoor’s stock was valued at $29.52 on July 5. When it was announced on July 6, the stock was valued at $26.94. A few days later on July 12, stock closed at $26.80.