Collegiate Pacific has acquired a majority stake, 53.2%, in Sport Supply Group, Inc (SSPY.PK) “SSG” from Emerson Radio of Parsippany, N.J. for $32 Million in cash.
Emerson has had holdings in Sport Supply Group since 1996, and has increased its investment in SSG over the years to its present holding of 4,746,023 shares of SSG, which were sold for $32 million, or $6.74 per share, in a transaction which closed on July 1, 2005. Emerson will realize net proceeds of approximately $29.4 million, after estimated current taxes and disposition costs, which will result in additional liquidity of approximately $1.08 per share in cash. For financial Emerson Radio News Release reporting purposes, Emerson will record a gain from the sale of SSG of approximately $0.43 per share, which will be reflected as part of the results from discontinued operations in the September 2005 quarter.
Geoffrey P. Jurick, Emerson's Chairman and Chief Executive Officer, said “The profitable sale of our SSG investment provides substantial benefits to Emerson on several levels. This transaction will enable us to focus more overall resources on our core business of designing, marketing and distributing quality consumer electronic products. Obviously, the proceeds will greatly enhance our financial capacity, even beyond that recently provided by our enhanced banking facility, and be available to be utilized for potential strategic acquisitions; debt repayments; stock repurchases; and other opportunities to generate stronger earning growth.”
Mr. Jurick continued, “We would like to extend our sincere appreciation to the management and staff of Sport Supply Group for their dedication and substantial achievements in returning the company to profitability.”
Commenting on the transaction, Michael J. Blumenfeld, Chairman and CEO of Collegiate Pacific stated: “We are extremely excited to have completed the purchase of common stock constituting a majority interest in Sport Supply Group, Inc. from Emerson Radio. SSG is poised to become both an immediate and long-term contributor to Collegiate Pacific's consolidated sales and earnings growth. Combining BOO management's 500+ cumulative years of marketing, manufacturing and distribution expertise with SSG's team and operating assets should yield impressive results. Aligning SSG's technology and infrastructure with BOO management's rapid growth model and mindset is a compelling fit. Terrence M. Babilla, formerly the COO of Sport Supply Group, will retain this position and take on the added role of President. We welcome Terry as a valuable member of the team.” Mr. Blumenfeld has been elected Chairman and CEO of Sport Supply Group, replacing Geoffrey P. Jurick, the Chairman and CEO of Emerson Radio, in that position.
Mr. Blumenfeld continued: “SSG both compliments and supplements BOO's existing market presence. SSG services formerly untapped markets for BOO such as the K-6th grade elementary/middle school markets; the public school bid system; out-of-school private youth sport leagues, and the Internet for institutional, team and consumer purchasing. SSG supplements BOO in the varsity recreation and athletic equipment markets via their strong catalog and web presence, and formidable marketing and distribution assets. Both Companies will continue to act as a powerful ally to their respective domestic branded partners and distributors as we expand our reach and continue to build BOO's institutional sporting goods franchise”
“SSG's management has proven particularly skillful in achieving cost cuts and operating efficiencies over the last 12-18 months, as evidenced by recent financial progress: FY05 net sales rose 7.3% to $90 Million vs. $83.9 Million in FY04. Operating income improved $6.1 Million to $2.2 Million vs. a FY04 loss of $3.9 Million — helped in large part by a $2 Million reduction in annual operating expenses. Combining SSG management's proficiency in operations with BOO's historic strength in the sales and marketing arena should prove valuable to both companies. SSG net income for the FY05 period was $2.1 Million vs. a FY04 loss of $1.7 Million. (The FY04 loss included a one-time gain of $2.7 Million; thus net income actually improved by $6.5 Million on an operating basis for the comparative period).
Adam Blumenfeld, President of Collegiate Pacific, commented further: “This transaction places a multitude of valuable assets under Collegiate Pacific's managerial umbrella.” Among them:
- Combined customer count of 175,000+
- Proprietary Customer Lists and Trade Names including MacGregor, Voit, Champion Barbell Company and Port-a-Pit Track and Field
- Industry-Leading Catalog Brands such as BSN Sports and US Games
- Substantial, Scalable Distribution Platform including a 180,000 sq. ft. facility located 1/4 mile from Collegiate Pacific Headquarters
- Substantial Manufacturing assets — doubling BOO's consolidated volume for steel and aluminum products
- Robust and Scalable SAP IT Platform
- Industry-Best Internet Platform powered by SAP — processed more than 75,000 web orders in FY05
- Sophisticated Inbound Call/Telephony Solution for Customer Care and Order Administration
- Industry-Leading Youth Sports Division
- Government Sales Division; Tripling current BOO market penetration
- “Distributor” Sales division; Tripling current BOO market penetration
- Industry leading presence in “Bid” markets; Substantial Elementary school presence
- 17 Road Sales Professionals; 187 Total under BOO umbrella
“We are raising our consolidated sales guidance for FY06 (beginning July 1, 2005) to a range of $220-$230 Million. The transaction will be accretive to BOO FY06 fully diluted earnings per share. We intend to more fully discuss specific Sales and EPS guidance for FY06 and beyond in the next few weeks once estimated costs related to FAS-141 (valuation related to goodwill and amortization) are more fully evaluated.
FY06 BOO consolidated EBITDA is expected to be approximately $15-$20 Million (excluding any transaction related costs) — a byproduct of continued growth from Collegiate Pacific and contribution from our 53.2% ownership interest in SSG. In accordance with the purchase method of accounting, Collegiate Pacific will be effectively reporting 100% of Sport Supply Group's net sales and 53.2% of their earnings on a go-forward basis.”