Gart Sports to Buy Oshman’s For $84 Million
In another big retail merger engineered by Los Angeles investment firm Leonard Green & Partners, sporting goods chain Gart Sports Co. said Thursday that it will buy rival Oshman’s Sporting Goods for $84 million in cash and stock.
The deal would cement Denver-based Gart’s place as the nation’s second-largest sporting goods retailer, behind the Sports Authority chain.
For Green, which owns 62% of Gart and would own 44% of the combined company, the merger continues the investment firm’s strategy of focusing capital on consolidation of “old-economy” businesses, especially retailing.
“We believe there is long-term value in creating an industry giant” in the sporting goods sector, said Jonathan Sokoloff, a partner at Green.
Sports superstore retailers such as Gart, Houston-based Oshman’s and Sports Authority have struggled in recent years amid generally flat sales for sporting goods and rising competition. Many chains have closed smaller stores in favor of superstores that sell everything from tennis rackets to camping gear to aerobics outfits.
But increased expansion has meant more competition, including from general retailers. In recent years, many sports-oriented chains have posted lackluster returns and have looked for partners.
“Consolidation is something that looks attractive to many retailers right now,” said Kurt Barnard, president of Barnard’s Retail Trend Report.
Green took a controlling stake in the Gart chain in 1992. In 1997, Green merged Gart with one of Southern California’s largest sports chains, Sportmart Inc.
Gart has 120 stores under the Gart and Sportmart names in 16 states, and has annual sales of about $700 million. Oshman’s has 58 stores nationwide, including 10 in California, and annual sales of more than $300 million.
The combined chain would operate in 25 states; 40 of its stores are in California.
The companies said they expect more than $10 million in annual cost savings and “buying synergies” with the merger, and that they foresee “very few store closings.”
Gart will pay $7 in cash and 0.55 Gart share for each Oshman’s share, valued at $12.91 based on Gart’s closing stock price Thursday.
The deal was announced after the market closed. Gart shares fell 25 cents to close at $10.75 on Nasdaq; Oshman’s rose 90 cents to close at $10.25 on the American Stock Exchange.
The merger is a typical one for Green’s partners, who have completed similar consolidation deals in the home improvement and drugstore industries.
Other investments by Green in recent years include Camp Hill, Pa.--based Rite Aid Corp., Santa Monica-based Veterinary Centers of America and San Diego-based Petco Animal Supplies.
Green, one of Southern California’s leading corporate buyout firms, has focused on old-economy businesses such as retailing. Its partners said they felt pressure in recent years to make investments in technology companies as that sector rocketed, but the firm declined.
“People were laughing at us a year ago,” said Sokoloff. “We took a lot of meetings to discuss whether to make a change [in investment style]. We feel vindicated now,” he said, given the tech sector’s crash.
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Top 10 Sporting Goods Retailers
The merger of Gart Sports and Oshman’s will cement Gart’s position as the second-largest U.S. sporting goods retailer. The 10 largest chains, ranked by 1999 sales:
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Chain (headquarters) 1999 sales (millions)* The Sports Authority (Fort Lauderdale, Fla.) $1.493 Gart Sports (Denver) $681 Dick’s Clothing & Sporting (Corapolis, Pa.) $675 Academy Sports (Houston) $611 Big 5 Sporting Goods (Los Angeles) $514 Modell’s Sporting Goods (East Meadow, N.Y.) $380 Galyan’s Trading (Plainfield, Ind.) $328 Oshman’s (Houston) $306 Dunham’s Athleisure (Waterford, Mich.) $225 Sport Chalet (La Canada) $176
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* sales for fiscal year most closely approximating 1999 calendar results
Source: DSN Retailing Today
