By Eric Smith
M&A heated up in the final full month of summer with several market-shifting transactions occurring in the active lifestyle space. August’s biggest moves included Camping World and Accell Group unloading non-core assets and Nike adding to its portfolio.
Of these, the one that turned the most heads was Camping World agreeing to sell outdoor specialty retailers Rock/Creek Outfitters (seven locations in Tennessee) and Uncle Dan’s Outdoor Store (six locations, including five in Illinois and one in Wisconsin) to Gearhead Outfitters (10 locations in the Mid-South) for an undisclosed amount.
The move signaled to investors that Camping World is trying to regain its footing after a couple of missteps with outdoor specialty.
In October 2017, Camping World acquired Uncle Dan’s for $8.2 million—$7.5 million in cash and $0.7 million in debt. In January 2018, under the Uncle Dan’s subsidiary, Camping World acquired Earth Sports LLC, dba Erehwon Mountain Outfitters, for $3.5 million. Camping World followed that deal with the April 2018 acquisition of Rock/Creek Outfitters Inc. for $5.2 million.
Camping World has struggled of late amid some recent operational moves and ongoing RV industry headwinds. And while the company didn’t broadcast its latest divestitures via press release (Gearhead announced the deal), Camping World on Tuesday announced a “shift” in its retail strategy. Selling Rock/Creek and Uncle Dan’s is clearly part of the company’s effort to double down on selling RVs.
“We believe the sale and/or servicing of recreational vehicles is our core and most important offering and, with the RV and outdoor consumer crossover, we believe there is an opportunity to continue growing our market share and improve our financial performance through the operation of locations with RV sales and/or service and, when feasible, our hunting, fishing and camping products,” said CEO Marcus Lemonis. “We will continue to operate our RV sales and/or service locations under three banners, Camping World, Gander RV and Outdoors and Gander RV.”
Now that Camping World has unloaded these specialty retailers less than two years after owning them, the company can refocus its efforts on RV sales, according to Brett Andress of KeyBanc Capital Markets.
In a note to investors, Andress wrote that with this latest move, Camping World “exits certain product categories (bikes, kayaks, certain marine and hunting selections, to name a few) and redeploys that capital toward used RV inventory (used RV sales were again a standout in 2Q19) as well as to generate cash given increased leverage. The first signs of this shift were evident in [the August] sale of Rock Creek, Erehwon, and Uncle Dan’s, shedding non-core retail assets that we estimate contribute $20M-$25M in sales (rough estimate) and were of little strategic value to the overarching Gander strategy.”
SGB will continue to track how, or if, these divestitures make a difference as the company fine-tunes its business model.
In the other big divestiture news item from last month, Accell Group NV sold its U.S. business—including the worldwide registrations of the brands Diamondback, Redline and IZIP—to the investment firm Regent LP. Accell and Regent also agreed on an exclusive two-year U.S. distribution partnership for Accell’s international brands—Raleigh, Haibike and Ghost.
The announcement came a month after Accell reached an agreement on the sale of its Canadian brand registrations of Raleigh, Diamondback, Redline and IZIP to Canadian Tire Corp. Ltd. for $16 million.
And Nike made a strategic move with the acquisition of Celect, a retail predictive analytics and demand sensing firm based in Boston, MA. Financial terms of the deal weren’t disclosed, but Celect is Nike’s latest acquisition fueling its Consumer Direct Offense strategy, a huge pillar of the company’s plan to continue taking share and growing revenue.
Analysts lauded the addition as Nike continues on its quest to hit $50 billion in annual revenue by 2023.
Jim Duffy of Stifel wrote in a note to investors: “The acquisition underscores Nike’s prioritization of digital investments, and should further distinguish itself as a leader in data-enabled retail and e-commerce. We admire Nike’s forward-thinking approach to data analytics and expect the integration of IP and competencies into Nike’s analytics group will help improve demand forecasting, inventory, allocation, revenue and margin. With a return to growth in North America and our view of the athletic category as having long-duration global secular and structural tailwinds, we see Nike as uniquely positioned to execute to a more direct model. We expect this translates to growth, margin improvement and strengthening ROIC longer-term.”
Here is the least you need to know about these top active lifestyle M&A deals from August:
The 411 – Gearhead Outfitters, an Arkansas-based outdoor specialty retailer, on August 15 announced the acquisition of Rock/Creek Outfitters in Tennessee and Uncle Dan’s Outdoor Store in Illinois from Camping World Holdings Inc. Terms of the deal were not disclosed, but the move signals a win for these specialty outdoor shops and a strategic rightsizing move for Camping World.
Reaction — “We are passionate about brick-and-mortar retail, the outdoor industry, our communities and our mission. The opportunity to acquire Rock/Creek and Uncle Dan’s has provided a unique opportunity for all three brands to align under those values as a family of outdoor specialty retailers. Our highest priority is to maintain the integrity of these companies, the brands we carry, and to expand the influence of the outdoor industry.”—Ted Herget, Owner and Founder, Gearhead Outfitters
What’s next? – In a release announcing the deal, the three outfitters—Gearhead, Rock/Creek and Uncle Dan’s—said they “share remarkably similar core values, and are committed to being a resource for customers seeking quality equipment, authentic advice and a dedicated community partner.” Added Rock/Creek president Chad Wykle: “Together, we will continue to strengthen and develop outdoor specialty retail. We know our heritage will continue with this acquisition and are confident our customers will welcome the return to a privately owned brand.”
The 411 – Accell Group N.V. on August 7 said it has reached an agreement with private equity firm Regent LP for the sale of its U.S. business, including the worldwide registrations of the brands Diamondback, Redline and IZIP. Accell and Regent also agreed on an exclusive two-year U.S. distribution partnership for Accell’s international brands—Raleigh, Haibike and Ghost.
Reaction — “With this announcement, we have completed the strategic review of our North American business. This allows us to eliminate the profit dilution, while we can continue to distribute our global brands to the US and benefit from the growing demand for e-bikes. We look forward to working with Regent as our U.S. distributor and as global supplier of its sports brand Mavic. The completion of the strategic review results in a one-off charge which we will absorb in H2 2019. We are glad that we can now put our full focus on accelerating growth of our European core business.” —Ton Anbeek, CEO, Accell Group
What’s next? – The estimated second-half impact of the sale of the U.S. business—about €46 million in EBIT and €10 million in cash—covers the transfer of U.S. trade working capital, main contractual obligations, the majority of personnel and the brand registrations for Diamondback, Redline and IZIP for a cash consideration of $1. The company said that with the divestment of the U.S. business and the earlier sale of the Canadian brand registrations, the North American operations can be considered as substantially liquidated, which results in a reclassification of the translation reserve of an €8 million loss to the income statement.
The 411 – Nike Inc. on August 6 said it had acquired Celect, a retail predictive analytics and demand sensing firm based in Boston, MA. Celect is Nike’s latest acquisition fueling its Consumer Direct Offense strategy, serving consumers personally at a global scale. Financial terms of the deal weren’t disclosed.
Reaction — “With the acquisition of Celect, Nike greatly accelerates our digital advantage by adding a platform developed by world-class data scientists. As demand for our product grows, we must be insight-driven, data-optimized and hyper-focused on consumer behavior. This is how we serve consumers more personally at scale.” —Eric Sprunk, COO, Nike Inc.
What’s next? – Celect’s team will immediately be integrated into Nike’s Global Operations Team and its co-founders will continue as tenured professors at the Massachusetts Institute of Technology, consulting Nike on an ongoing basis. Said John Andrews, Celect CEO: “We’re thrilled to be joining the Nike team, adding our unique and innovative capabilities to the data and analytics foundation they’ve been building over the years.”
Other deals from last month.
In case you missed any, here are other notable deals—announcements of either new acquisitions or ones that closed—that occurred across the active lifestyle industry in August (links direct to SGB’s initial coverage of the transaction):
- Boot Barn Acquires G.&L. Clothing
- P1440 Acquires Volleyballmag.com
- Stack Sports Acquires Affinity Sports And Blue Sombrero
- Century Arms Acquires Springfield Sporters
- Loot Crate Files For Bankruptcy, Agrees To Be Acquired
- KJK Sports Completes Purchase Of Baltic Bicycle Trade UAB
- Steve Madden Completes Acquisition Of BB Dakota
- Steve Madden Completes Acquisition Of Greats
- The Vitamin Shoppe To Be Acquired By Liberty Tax
- Barneys Has Until October 24 To Find Buyer And Avoid Liquidation
- QBP To Purchase Barnett Bicycle Institute
- Xtep Closes K-Swiss Acquisition
- Wacoal International Acquires Lively
- Lew’s Holdings To Acquire Fox International
- Augusta Sportswear Acquires Pacific Headwear
- True Sports Acquires Accra Golf Shafts
Photo courtesy Getty