JO Acquisition Corp., formed by Johnson Outdoors chairman and CEO Helen Johnson-Leipold to take the company private, has filed its preliminary proxy statement with the SEC. The proxy statement outlines both companies reasoning for the transaction as well as the procedure shareholders must follow to allow or prevent such a transaction from taking place.
Currently, Helen Johnson-Leipold and the participating shareholders of JO Acquisition Corp. represent roughly 76.5% of the combined Class A and Class B votes. At least 80% of this combined entity must vote in favor of the acquisition in order for the going-private transaction to take place.
Additionally, a majority of the Class A common stock-holders and a separate majority of the Class B common stock-holders must vote for the transaction. Helen Johnson-Leipold and the participating shareholders of JO Acquisition Corp. own 45.4% of the outstanding Class A common stock and 95.9% of the outstanding Class B common stock. For the final vote, at least 66.66% of the shareholders not involved in JO Acquisition Corp. must vote in favor of the transaction.
Should the merger go through, JO Acquisition Corp. has received a commitment letter from GE Capital, providing financing of up to $142.0 million and 27.0 million. These funds will be used to pay the $20.10 per share merger consideration and related fees and expenses. The funds will also refinance some existing debt, and provide a portion of the working capital needs. Should the merger not go through, JO Acquisition Corp. is entitled to a $3 million reimbursement.
Some of the reasons given for the going-private transaction included: eliminating expenses of roughly $700,000 annually related to the Sarbanes-Oxley act; allowing greater operating flexibility as a privately-held company by allowing management to concentrate on long-term growth and to reduce its focus on the quarter-to-quarter performance; and removing access to information concerning Johnson Outdoors and its operations, financial results, and directors and officers from its competitors.
In other news, Johnson Outdoors first fiscal quarter net sales increased by 19.1%, driven by the Marine Electronics and Outdoor Equipment business units. The going-private transaction added $0.9 million to JOUT expenses. Remove this cost and the $0.2 million in quarterly expenses related with Sarbanes-Oxley and Johnson Outdoors would have posted a net income of roughly $0.1 million.
During a conference call with analysts, investors, and the media, COO Jerry Perkins said that Outdoor Equipment had another strong quarter with sales jumping 19.3% on strength in the military business. However, Johnson Outdoor is not counting on much continued business with the U.S. government.
“It was a nice surprise, but I want to underscore that the current military and emergency orders are coming to an end,” said Perkins.
JOUT is forecasting a 40% drop in volume in the military tent segment for fiscal 2005, partially attributed to the competitive bidding environment that makes it increasingly difficult for the company to win contracts.
In response to this, Johnson Outdoors is focusing on the consumer and commercial tent markets. Perkins said the outdoor retail environment is showing, “
some favorable trends generally, but nothing to go to the bank with.”
Johnson Outdoors is also exploring partnerships and new technologies designed to help grow penetration and volume in the commercial tent segment.
Johnson Outdoors Watercraft division is still bleeding red ink, but the company feels that it is headed in the right direction. The $3.1 million allocated by JOUT to restructure the division is largely spent. With solid improvements to margins and operating profits, the company does not see the need to spend more.
During a conference call with analysts, investors, and the media, Helen Johnson-Leipold said, “It is still too early to say if we have turned things around, but it is clear we are going in the right direction.”
The diving division also pulled sales down due to weakness throughout the entire industry. Reversing this downward trend is JOUTs “top priority,” but at the same time the company wants to protect dealers by reducing grey market activity and closeouts.
Marine Electronics sales improved through all channels, but the recent Hummingbird acquisition pulled margins down slightly.
JOUT Management did not provide any guidance for the remainder of fiscal 2005.
