An ad hoc committee of Performance Sports Group Ltd.’s shareholders filed a legal objection to a proposed auction of the insolvent company’s assets. The committee argued that the short time frame and the bidding structure make it too difficult for anyone to compete with an offer from a group led by Sagard Capital Partners LP.

When it filed for bankruptcy on October 31, the parent of Bauer and Easton indicated it already had a deal in place to sell nearly all of its assets for $575 million to an investor group led by Sagard Capital, its biggest shareholder, and Fairfax Financial Holdings Ltd.

Sagard Capital is serving as the “stalking horse” bidder for an expected auction as part of bankruptcy court proceedings. Stalking horse bids typically represent a minimum opening price offered by existing shareholders in the business to prevent bargain-basement bids. Sagard owns 17 percent of PSG.

The protesting shareholder group, however, argues that the Sagard offer threatens to “freeze out” shareholders while reserving much of the company’s value for the Sagard group.

The restrictions the group claims would “chill competitive bidding” include a minimum bid requirement of all-cash $582.5 million, a required “good faith deposit” of 5 percent of the purchase price in cash and excessive “bid protections,” including a $20.1 million break-up fee owed to Sagard and a requirement for the company to reimburse $3.5 million of Sagard’s expenses if it is not the winning bidder.

“The proposed sale process – led by Sagard’s stalking horse bid – has all the outward appearances of an ‘inside job,’” the group said in a legal filing. “Potential bidders do not tend to expend the time and money to engage in M&A processes where a board [favorite] has the ‘inside track’ to winning.”

The group is seeking to delay the proposed bidding timetable for PSG, which gives potential bidders until January 4 to submit offers.

The court filing does not disclose which shareholders of PSG are members of the ad hoc committee. One other possible bidder for the company, however, is former PSG Chairman Graeme Roustan, who told Reuters in August that he was working with investment banks to explore a bid for the company.

Samuel Robinson, president of Sagard, said in a statement provided to The Globe And Mail that Sagard’s bid represented a typical structure in such cases.

“The Sagard/Fairfax bid is valued and structured to be thoughtful and fair to all stakeholders, and includes provisions and bid protections which are customary for this type of transaction,” said Robinson in a statement.

PSG makes baseball bats, lacrosse sticks and other sports equipment under the Bauer, Easton, Maverik, Mission, Cascade, Inaria and Combat names.

Photo courtesy Bauer