Well, the time for chasing rumors is now through, and the landscape for the Sporting Goods Industry in the U.S. will be changed forever. After many years of attempting to establish itself as a national entity, The Sports Authority will finally achieve that distinction – but not as it originally intended.
Gart Sports and The Sport Authority announced last night that the boards of both companies had agreed to a “merger of equals”, with each TSA shareholder receiving 0.37 shares of GRTS stock. Current shareholders of each company would receive roughly 50% of the new entitys stock. Leonard Green & Partners, L.P., which beneficially owns approximately 25% of the outstanding common GRTS stock, has agreed to vote in favor of the transaction.
The combined entity will be named The Sports Authority, Inc., headquartered in Englewood, CO, and will apply for listing on the NYSE under the ticker symbol TSA. The new company has pro forma 2002 sales of $2.5 Billion and 385 stores in 45 states.
The merger is expected to close by the third quarter, but company officials intimated in a call this morning with analysts that it could be done “by June”.
Current TSA CEO and Chairman Marty Hanaka, will serve be chairman of the combined company, and Doug Morton, current president and CEO of Gart Sports, will become vice chairman and CEO of the combined company. Elliott Kerbis, president and chief merchandising officer of Sports Authority, will retain his role in the combined company. Tom Hendrickson, CFO of Gart Sports, will become chief administrative officer and CFO of the combined company.
George Mihalko will be leaving the organization. Mr. Hanaka stated that the move of the new company to Denver signals that the new entity will be run by Doug Morton and will retain the culture of the current Gart organization. “We will have one CEO and one culture”, said Hanake.
The new company will clearly leverage their newfound strength in building on private label programs – expected to reach 10% – 12% of total sales – and well as building on the strengths of each organization. Mr. Morton indicated that the company will be fully integrated as it evaluates and employs the best practices” of each company. Many systems are similar and will smooth the transition.
The plan is to accelerate the store remodel program at existing TSA stores after the integration. The combined company will now have stores in every NFL market. Said Morton, “we will always win the Super Bowl”. Mr. Hanaka pointed out that the combined company will have reduced seasonal weather risk as well.
>>> This merger will be extremely disruptive to sales and merchandising organizations in both locations (and in FL in particular)…
>>> This will put tremendous pressure on vendors margins, especially those in the equipment sector where the combined company will now do $1.5 billion…
>>> And then there is the human cost of the employees eliminated in this move, which is where the biggest savings is realized…