In a much-rumored and anticipated move, an agricultural co-op largely unknown outside its base in Alberta, Canada has recapitalized struggling outdoor retailer Sportsmans Warehouse as part of a deal that could make it a key player in the crowded U.S. hook n bullet market.
UFA Co-operative Limited said it signed a Memo of Understanding under which subject to completion of negotiations and due diligence it will acquire a majority interest in Sportsmans Warehouse. As part of the deal, UFA injected an undisclosed sum of capital into the retailer to help it restock its shelves in time for the holiday season. Sports Executive Weekly heard from numerous sources over the summer that vendors had started to curtail or suspend shipments to the retailer. The rumors of a Canadian buyer surfaced over a month ago as the retailer struggled to stay afloat.
Utah-based Sportsmans Warehouse operates 67 stores in 38 states and generates sales of $800 million a year. The retailer began suddenly closing stores in Arizona, Michigan and Texas last fall before announcing in December 2007 that GE Commercial Finance Corporate Lending had provided it with a $325 million asset-based credit facility. Still, vendors continued to tighten the terms under which they offered credit, making it difficult for the retailer to replenish merchandise in a timely manner.
That led to reports of bare shelves and the closure in October of the retailers store in Victorville, CA just four months after it opened.
UFA managers are already working with the company at its Midvale, UT headquarters to re-establish better credit terms with vendors, according to Natalie Dawes, manager of corporate communications for UFA. The deal is expected to close in January, at which time UFA expects to own 80% of Sportsmans Warehouse, said Hawes.
UFA managers are already working with the company at its Midvale, UT headquarters to re-establish better credit terms with vendors, according to Natalie Dawes, manager of corporate communications for UFA. The deal is expected to close in January, at which time UFA expects to own 80% of Sportsmans Warehouse, said Hawes.
UFA was founded in 1909 to serve farmers in Alberta and went on to form a progressive political party that governed the province through the Depression. It has since become Canadas largest gasoline and diesel re-seller and operates 35 Farm and Ranch Supply stores and 120 gas stations. UFA expects its revenues to top $2 billion in 2008, twice their level four years ago. Its board, which is elected by 43 delegates who are in turn are elected by the co-ops 110,000 members, approved a plan to diversify into hunting, fishing and camping to round out its franchise under the motto of “serving people who work, live and play in rural communities.”
“We were not necessarily looking to acquire in the United States,” said Dawes, “but what our management team is always doing is looking for opportunities to diversity for financial stability – to strengthen our business. One of the key things for us with the Sportsmans Warehouse acquisition is buying power.”
UFA was introduced to the Sportsmans Warehouse team through Russ Butler, who sold Wholesale Sports, a Canadian sporting goods chain, to UFA in July. Wholesale Sports stores average 35,000 square feet in size, while Sportsmans Warehouse stores range from 45,000 to 90,000 square feet. Calgary-based Wholesale Sports offers brand name goods under a good, better and best strategy in more urban, second-tier Canadian markets. UFA plans to continue operating both chains as separate subsidiaries for the foreseeable future.
Hawes declined to say how UFA is financing its investment in Sportsmans Warehouse. She did note, however, that co-op's member loan program, which provides the co-op with a $20 million loan priced just over prime, has been fully subscribed for years. The co-op reported net earnings of $37.3 million on revenues of $1.8 billion in 2007, after paying a record $35.2 million in dividends to its members.
