By Thomas J. Ryan
Showing its commitment to invest in its accessories division and diversify from firearms, Smith & Wesson Holding Corp. reached a definitive agreement to purchase substantially all of the assets of Taylor Brands, LLC, a leading supplier of knives and outdoor tools. The purchase price was $85 million.
The acquisition will become part of BTI Tools, LLC, a newly formed, wholly-owned subsidiary of Smith & Wesson’s accessories division, Battenfeld Technologies Inc.
Taylor Brands, established over 40 years ago, has been a long-standing licensee for both Smith & Wesson and M&P branded knives and is the direct owner of a number of legacy brands including Schrade, Uncle Henry, Old Timer and Imperial. Beyond fixed and folding knives, it makes collapsible batons, tactical pens, handcuffs, tactical and survival accessories and flashlights. Based in Kingsport, TN, Taylor Brands operates out of a 160,000-square-foot facility.
Excluding any of the expected “significant” cost savings to be realized in its next fiscal year as a result of an acquisition tuck-in of a major licensee, the purchase price represents an estimated multiple of approximately 11 times the trailing twelve month EBITDAs.
“Taylor Brands provides us with an ideal opportunity to further deliver on an important element of our strategic plan, which is to grow our accessories division by expanding into adjacent and complementary markets,” said James Debney, president and CEO of Smith & Wesson.
The accessories segment was formed with the December 2014 acquisition of Battenfeld Technologies, a leading manufacturer of shooting, reloading, gunsmithing and gun cleaning supplies, for $130.5 million. The acquisition follows the acquisition in February 2016 of PowerTech Inc., a manufacturer of tactical flashlights, universal LED lights, and personal pocket lights, for $1.2 million.
Along with other firearms makers, Smith & Wesson has been looking to better balance its assets so its results are less completely reliant on firearms, which has lately been a politically-charged, boom-or-bust category. In its fiscal year ended April 30, its firearms unit made up $657.6 million of its sales versus only $65.3 million for its accessories segment. As of the date of acquisition, Taylor Brands trailing twelve months revenue was approximately $39 million.
“Taylor Brands has delivered solid growth as well as gross margins that are aligned with those in our existing Accessories Division,” added Debney. “We believe that these newly added product lines will benefit synergistically from the product innovation, distribution network, and efficient sourcing model that have contributed to the success of our accessories division under the leadership of its president, Jim Gianladis. Today’s announcement moves us closer to our vision, which is to become the leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast.”
Smith & Wesson intends to complete the acquisition with cash on hand with a closing expected in three to six weeks. Due to its anticipated timing, no impact is projected on Smith & Wesson’s operational and financial results for the fiscal 2017 first quarter ending July 31.
Morgan Taylor, president of Taylor Brands, said, “We are proud that the company my family founded in 1975 has grown to become a leading and highly regarded knife and tool provider. We look forward to achieving our next level of growth and continuing to serve our loyal customers as part of Smith & Wesson and with the benefit of Battenfeld Technologies’ extensive distribution network and product development processes.”
Shares of Smith & Wesson (Nasdaq:SWHC), which makes the best-selling handgun in the U.S. and is the market leader in modern sporting rifles, have jumped over the last year largely due to a boost in sales over concerns that stricter gun-control laws may be enacted following a series of mass shootings. Shares have risen 32 percent since the start of the year and are up about 75 percent over the next 12 months. The stock was up another 1.5 percent, July 18, following the the most recent news.
In early July, the FBI reported that NICS (National Instant Criminal Background Check System) background checks surged in June following the deadly shootings in Orlando, FL in June. The current year is now on pace to easily break the record in 2015 for most checks in a year. The San Bernardino killings in December 2015 and the Sandy Hook Elementary shooting in Newtown, CT likewise fueled surges in background checks.
Smith & Wesson’s firearms division brands include Smith & Wesson, M&P, and Thompson/Center Arms. The accessories division now includes Caldwell Shooting Supplies, Wheeler Engineering, Tipton Gun Cleaning Supplies, Frankford Arsenal Reloading Tools, Lockdown Vault Accessories, Hooyman Premium Tree Saws, BOG POD, and Golden Rod Moisture Control.
Photo courtesy Taylor Brands
