Alliant Techsystems (ATK), the world’s largest ammunition maker, reached an agreement to acquire Bushnell Group Holdings, Inc., the maker of branded sports optics, outdoor accessories and performance eyewear. The purchase price was $985 million in cash.
Beyond the iconic Bushnell brand, Bushnell Group’s brands include Primos, Bollé, Hoppe's, Uncle Mike's, Butler Creek and Serengeti. Its products include laser rangefinders, trail cameras, riflescopes, binoculars, hunting and shooting sports accessories, and sun, winter and safety eyewear.
The purchase price of $985 million in cash represents a projected calendar 2013 EBITDA multiple of approximately 10 times. Bushnell's projected sales for calendar 2013 are approximately $600 million.
ATK, based in Anoka, MI, is best known for producing ammunition and rockets for the government and its defense group remains ATK’s largest business unit. The $3 billion publicly held company also developed some of the space-flight hardware used by the Mars rover Curiosity that landed last year. The expanded focus on sporting goods is expected to offset its lagging business in the defense sector, which has been the target of cutbacks.
On a conference call with analysts, Mark DeYoung, ATK’s president and CEO, said Bushnell will be integrated into ATK's Sporting Group under the leadership of Jay Tibbets “and we expect this acquisition to accelerate ATK's overall growth rate.”
ATK will integrate Bushnell into the company’s Sporting Group within its existing accessories business. ATK's Sporting Group claims to be the leader in sporting and law enforcement ammunition and shooting accessories. ATK's ammunition brands include Federal Premium, CCI, Fusion, Speer, Estate Cartridge and Blazer. ATK's accessories brands include BLACKHAWK!, Alliant Powder, RCBS, Champion targets and shooting equipment, Gunslick Pro and Outers gun-care products, and Weaver optics and mounting systems. In June 2013, ATK acquired Savage Sports Corp., which addedcenterfire and rimfire rifles, shotguns and shooting range systems used for hunting, competitive and recreational shooting to its product offering.
ATK’s Sporting Group will represent approximately 45 percent of ATK's go-forward revenue on a combined basis.
DeYoung called the Bushnell acquisition “highly complementary” to ATK’s Sporting Group's business, while also adding new exposure to outdoor recreation and camping, golf and snow skiing markets.
“Bushnell's strength in sourcing, distribution and brand management offer us the opportunity to increase the reach and accelerate the growth of our existing accessories offerings,” said DeYoung. “In addition, ATK continues to increase its international presence, and Bushnell's international capabilities will support our expansion. Bushnell has a proven history of improving and growing the businesses it acquires. ATK plus Bushnell plus Savage results in a comprehensive product offering of ammunition, sporting arms, and
accessories.”
ATK expects to complete the transaction in ATK's third or fourth quarter of its current fiscal year ended March 31, 2014.
Cost synergies for the new Sporting Group will include alignment of strategic accounts under ATK's existing direct sales structure; efficiencies in marketing, brand and product line management; consolidated sourcing; optimized distribution and operational support functions; and significant recurring cost synergies that will be fully captured by fiscal-year 2016.
ATK expects the acquisition to result in FY14 EPS dilution due to the stub period, transaction expenses and purchase accounting. ATK expects the acquisition to be accretive to EPS in its first full year of operations (FY15), including impacts associated with transition expenses, and estimates FY16 EPS accretion of approximately $1.00. As part of this transaction, ATK has secured a $900 million senior secured acquisition financing commitment. ATK will finance the acquisition through a combination of this new financing, borrowings under its existing revolving credit facility, and cash on hand.
Blake Lipham, Bushnell Outdoor Products president and CEO, said in a statement, “The opportunity to join the ATK family will allow us to further support the emerging needs of our customers and consumers.”
ATK officials said Bushnell has historical sales growth in the mid-teens, which includes both organic and acquired growth. Organic sales growth has been approximately 7 percent per year from 2010 to 2012. With modest capital expenditure requirements, Bushnell also produces strong cash-flow generation.
Bushnell, based in Overland Park, KS, is a portfolio company of MidOcean Partners, a middle-market, private equity firm headquartered in New York. The firm has owned Bushnell since 2007, when it acquired it from another PE firm.
The deal comes as gun manufacturers have been thrust into the spotlight by the death of 20 first-graders and six adults at the Sandy Hook Elementary School in Newtown, CT, in December.
The Teachers’ Retirement System of the City of New York and New York City Employees’ Retirement System sold shares in ATK after the Newtown massacre, according to Reuters.
