Everythings bigger in Texas, so the saying goes, and the statement is now even more relevant in the team dealer end of the sporting goods business after Collegiate Pacific acquired a majority stake of Sport Supply Group, Inc. last week.
The deal sees BOO acquire 53.2% of Sport Supplys outstanding stock from Emerson Radio for $32 million in cash or $6.74 per share. In 1996, Collegiate sold its stake in Sport Supply to Emerson for about $7 per share at a time when SSPY posted $90 to $100 million in annual sales and $5 million – $8 million in operating income. Since 1996, Emerson has substantially increased its holdings in Sport Supply to bring its stake to the 53.2% mark.
For Sport Supplys most recent year-end, revenues were $90 million and operating income was $2.2 million, but both these numbers were improvements over the prior years, with operating income making a $6.1 million positive swing.
Michael Blumenfeld, chairman and CEO of Collegiate Pacific, noted in a conference call with analysts that Sport Supply has re-emerged from its tough phase and has positioned itself to grow, most notably with the help of the Internet.
A factor in creating hard times for Sport Supply was its use of SAP technology, which analysts estimate cost the company anywhere from $20 million to $30 million to implement. However, it is this technology which Collegiate sees as a major growth vehicle for the future of both companies.
Blumenfeld pointed out that while Collegiate is still in its Internet infancy, SSPY processes over 75,000 orders each year and is transitioning the team sports industry from an industry mired in paper catalogs to one which is based on the Internet portal and its ability to conduct sales. Currently, 10% to 12% of sales for Sport Supply are conducted over the Internet, a number which Collegiate only sees growing in the future.
Along with Collegiates need for Internet-savvy salesmanship, other synergies between the two entities include complementary distribution space with SSG possessing a 300,000 sq. ft. facility a quarter of a mile from BOOs over-crowded facility, a market presence that will see few overlaps as the two jigsaw together their various markets, management at BOO that is focused on marketing and sales while SSPY is focused on operations and efficiencies, and a general mashing of products which will allow BOO to carry SSPY brands and vice-versa.
For the year ahead, Collegiate forecasts a combined entity sending out 3 million catalogs, employing a sales force of 187 (with 17 added from SSPY), and producing $220 million to $230 million in sales.
