Clarus Corp., formerly Black Diamond Inc., completed the acquisition of Sierra Bullets LLC for $79 million, subject to a post-closing working capital adjustment. The transaction is expected to be immediately accretive to Clarus’ earnings per share.
Since 1947, Sierra’s products have cultivated consumer following recognized by its “green box” packaging. It includes brands such as Sierra MatchKing, Sierra GameKing and Sierra BlitzKing.
In addition to a wide base of retailers, Sierra’s customers include distributors, law enforcement agencies and industry OEMs. This diversification is further enhanced by an approximate 400 SKU offering, which has historically mitigated customer and product concentration risk. As a manufacturer of premium products targeting outdoor sportsmen, Sierra believes it has been relatively insulated from exogenous demand volatility. Its premium sales channels have also historically been less susceptible to discounting, driving higher margins for Sierra’s retail and OEM customer base.
For the unaudited 12 months ended June 30, 2017, Sierra’s total revenues were approximately $32 million with EBITDA of approximately $12.5 million, representing a purchase price multiple of approximately 6.3x EBITDA. Sierra has a strong cash flow profile, generating free cash flow conversion of approximately 95 percent with limited ongoing CapEx requirements.
“The team at Sierra has continued building on a 70-year legacy dedicated to the highest-level of precision in design, world-class manufacturing and quality control,” said Warren B. Kanders, executive chairman of Clarus. “These attributes have cultivated a diverse customer base of enthusiasts and industry OEMs that drive high recurring revenue and strong cash flow, which we expect to maximize through the utilization of our net operating loss carry-forwards.”
Clarus expects to leverage its various strategic and financial resources to accelerate Sierra’s growth. This includes investments to enhance marketing and digital capabilities, improve distribution, forge new customer accounts, and develop new products.
Sierra is led by at senior management team with decades of combined manufacturing and industry expertise that is dedicated to the long-term growth of the brand. All senior management are expected to remain with Sierra under Clarus’ ownership.
Sierra’s President Pat Daly commented: “Our team takes great pride in developing and manufacturing the most precise and accurate bullets in the world. This is supported by our deep institutional knowledge of highly-specialized manufacturing processes that have produced leading products and created a significant competitive advantage. As the only pure-play bullet brand, it was important for us to partner with a team that shares our values and commitment to excellence, and we are excited to join the Clarus family. I look forward to staying on to continue driving our brand growth.”
In connection with the transaction, Clarus increased the size of its senior credit facility from $20 million to $40 million.
An updated financial outlook and further discussion on Sierra is expected to be provided during Clarus’ third quarter 2017 earnings report.
Kanders concluded: “We remain committed to seeking to acquire additional companies in industries potentially unrelated to outdoor that satisfy our investment criteria as we found in Sierra. In addition, the minimal leverage incorporated in this transaction and Sierra’s free cash flow dynamics are expected to provide capacity for future acquisitions utilizing our structure.”
Photo courtesy Sierra Bullets