MacGregor to Buy Irvine Sports Cap Maker, Distributor

Family-owned Sports Specialties Corp., an Irvine marketer and distributor of the successful Pro brand baseball caps, will become part of the giant MacGregor Sporting Goods Inc. under a tentative acquisition agreement worth between $15 million and $17.3 million in cash and stock.

The sale price would be nearly 12 times the net income Sports Specialties reported for its 1986 fiscal year, according to a prepared statement released Tuesday.

Founded by David Warsaw in 1928 and now run by sons James and Robert, Sports Specialties will give MacGregor one of the few items of athletic apparel it does not yet make.

“We don’t make caps, so this is a very good fit,” said Thomas E. Gerson, assistant to MacGregor’s chairman. “Sports Specialties is very good at making and marketing caps.”

With only one-sixth the revenue of MacGregor, Sports Specialties posted net income last year that could be as much or more than New Jersey-based MacGregor will report for its fiscal 1986.

For the fiscal year ended March 31, Sports Specialties reported net income of $1.5 million on revenue of $12.4 million. MacGregor reported revenue of $59.1 million and net income of $714,000 for the first three quarters of its fiscal 1986. A company official said MacGregor expects to post full-year revenue of $78 million when the financial statement is completed for the fiscal year ended July 31.

Sports Specialties holds the license to market and distribute caps embroidered with team logos from Major League Baseball, the National Football League, the National Basketball Assn. and the National Collegiate Athletic Assn. It also sells caps to a number of teams in all four leagues. It has exclusive manufacturing arrangements with facilities in Arizona, South Korea and Costa Rica.

MacGregor makes just about every other item of athletic apparel, except shoes. It also is one of the leading manufacturers and importers of athletic equipment and makes the Riddell brand football helmet. It is licensed to sell professional and collegiate-style apparel by the same four organizations that have awarded licenses to Sports Specialties, and it sells uniforms and other apparel to a number of professional teams.

Under the letter of intent signed Saturday, MacGregor will buy Sports Specialties for $8.2 million in cash and $6.8 million in MacGregor common stock and will pay $2.3 million more in cash if certain performance conditions are met over the next five years.

The stock provision would give the Warsaw family about 9% of MacGregor, based on Tuesday’s closing price of $12.875 a share. The stock price will be set at the time the deal is consummated, which the companies hope will be in mid-October, Gerson said.

MacGregor does not plan to tinker with the success of Sports Specialties, Gerson said. The new parent is “bullish” on the Warsaw brothers, he said, and expects to leave the company in their hands.

“They’ve been very successful,” he said. “Their expertise in licensing is valuable, and we want to increase our presence in the professional leagues. We think it’s a well-run operation.”