Sportmart, Gart to Merge
In a move expected to spark increased consolidation among sporting goods retailers, one of Southern California’s largest sports superchains, Sportmart Inc. will merge with privately held Gart Sports Co., sources familiar with the matter said.
Under the agreement, expected to be announced today, publicly traded Sportmart will merge with Denver-based Gart, creating the nation’s second-largest chain of sporting goods stores, with about 120 stores in 13 Western states and an estimated $700 million in annual revenues.
Wheeling, Ill.-based Sportmart has 59 stores, about half of which are in California. The company, one of the pioneers in the superstore concept, has about 18 stores in Southern California. It also has stores in Seattle and Portland, Ore.
Gart, with 61 stores in Colorado, New Mexico, Utah, Idaho, Wyoming, Montana and Washington, was acquired by the Los Angeles private buyout firm of Leonard Green & Partners in 1992.
Leonard Green would own 60% of outstanding shares of the new publicly traded company, Gart Sports Co., which would be headquartered in Denver and plans to be listed on Nasdaq. Sportmart’s stock rose almost 50% last week, from $3.13 to $4.75 a share, although there was no official news about merger talks.
“This will clearly be the dominant sporting goods chain on the West Coast,” said Jonathan Sokoloff, a partner at Leonard Green, which last week completed the acquisition of Hechinger Co. and Builders Square, to create the nation’s third-largest home improvement chain.
“We have tremendous confidence in the Gart management team to substantially improve Sportmart and grow the company,” Sokoloff said.
Doug Morton, Gart chairman and chief executive, would serve as chairman, president and CEO of the new company.
“This brings together two innovators who pioneered the first sporting goods superstore in the early 1970s,” said Morton. “This merger combines two companies with highly complementary strengths. And we believe the new entity will have both the operational expertise and the financial strength needed to succeed in this highly competitive industry.”
Sports superstores are typically 40,000-square-foot stores that offer everything from tennis rackets, camping gear, aerobics outfits and baseball hats and basketballs. These types of stores grew rapidly during the late 1980s.
But increased expansion has meant increased competition from other chains and general warehouse stores. In recent years, many sports-oriented chains have posted lackluster returns.
Gart, which will be opening three new superstores by the end of the year, had $204 million in revenue for its last fiscal year and net income of $4.5 million.
Shareholders of Gart will hold 72.5% of the new company, while Sportmart shareholders will hold the rest. Majority shareholders have already agreed to vote in favor of the merge agreement.
Andrew Hochberg, CEO of Sportmart, and Larry Hochberg, its founder, will be directors of the new company. “I believe this transaction will improve our position in a difficult industry,” said Larry Hochberg.
There is almost no overlap between the two companies, so there is expected to be no store closings. The deal is expected to be completed by the end of 1997.
Gart is particularly well-known in Denver for its traditional ski equipment mega-sale called Sniagrab, which is the word “bargains” spelled backward.
The nation’s largest player in the industry is Sports Authority Inc. of Florida, with a market capitalization of $558 million. Sportmart’s is $33.7 million.
