Remington Acquires Majority Stake in Mountain Khakis

Remington Arms Company Inc. announced Thursday it had acquired a 75% stake in Mountain Khakis LLC on May 28. Remington is owned by Freedom Group, Inc., a company created by the private capital firm Cerberus in 2007. Terms were not disclosed. Freedom Group (FGI), which filed for a public offering last fall, reported sales of $846.1 million for the twelve months ended March 31, 2010. The company has yet to price its IPO.

The deal is somewhat unusual for FGI, which typically acquires all of a company’s stock. The Madison, NC-based company has acquired nine firearms-related companies since Cerberus created it to buy Remington. The Mountain Khakis deal, said Freedom Group, Inc. CEO Ted Torbek, represents FGI’s “commitment to the outdoor lifestyle.”

Current plans are for Mountain Khakis to remain largely autonomous. Co-founder Ross Saldarini will remain at the company’s helm as president, where he will guide day-to-day operations. Blackhawk Capital Management, founded by Mountain Khakis co-founder W. Mac Lackey, will remain the largest minority shareholder of Mountain Khakis.
In an interview Thursday, Lackey said he will remain on the board and that virtually all of Mountain Khakis’ investors – from angel investors to founders and employees – remain investors. 

The cash infusion will allow Mountain Khakis to accelerate hiring at both its Charlotte headquarters and its design office in Jackson, WY, Lackey said. Much of that will focus on beefing up marketing. “We’ve been doing a tremendous amount of social media in the last year and we will absolutely be pushing that harder and probably hiring a full-time person,” he said. Sales will remain with the company’s independent rep force.

The capital infusion will also enable Mountain Khakis to accelerate product development after being forced by the economy to shelve some plans in the last 12 to 18 months. Mountain Khakis launched its first product, a men’s pant in 2004 and has since added shorts and women’s and children’s lines. It introduced a line of synthetic pants, shorts and convertibles at retail this year and the company’s dealers are clamoring for a fuller line, said Lackey.

In the last 12 to 18 months, however, the economy prompted the company to hit the brakes. It slowed product development and lowered head count in a bid to conserve cash. While unable to significantly increase sales, it has emerged from the recession with greater distribution and market share, improved margins and a stronger brand, said Lackey.

“Now we can fill out the line,” said Lackey. “We are moving above the waist for the first time with a line of tops. It's resource intensive and now we will be able to move quicker. Then we will continue to extend women's and kids product. We will fill out the line between adults and kids by addressing teens in junior high and high school.”

Mountain Khakis was not soliciting investors when it was contacted by Freedom Group Chairman Walter McLallen through a Charlotte banker. McLallen noticed that both he and the banker were wearing a pair of Mountain Khakis pants at an event and introduced himself. The banker then offered to introduce McLallen to the principals at Mountain Khakis.
Lackey acknowledged that at first-a firearms company seemed an unlikely strategic partner-but as the companies got to know one another, they recognized many mutual interests.

 

For instance, Freedom Group is very interested in offering more lifestyle products to their customer base of hunters, ranchers and shooting sports enthusiasts.

“We believe there are significant opportunities for our licensed products as we believe consumer preference is continuing to move toward an outdoor lifestyle,” notes the company in a registration statement for its proposed IPO.

Freedom Group, of course, offers strong relationships with hook and bullet retailers like Cabela’s and Gander Mountain, which are only now testing Mountain Khakis in a few stores, said Lackey. Mountain Khakis  gets roughly 70% of sales from the specialty outdoor retail channel, including REI, which has been steadily increasing the number of its stores selling the brand. The balance of Mountain Khakis’ sales come from bigger box retailers, fine men’s clothing stores, equestrian, fly fishing and other lifestyle retailers. The brand is just cracking into the hook and bullet channel, where it thinks it can position itself as a brush pant brand. The companies will move quickly to market Mountain Khakis directly to Freedom Group’s existing customers using its extensive direct marketing database, Lackey said.

“I think we've been very protective of our brand and message,” said Lackey. “Our view is we spend a lot of time with the team from Freedom and their views of not only their company, but on strategy and growth and we are thrilled with how they view managing the brand.”