In what will mark its largest acquisition to date, Vista Outdoor, Inc. announced that it had agreed to acquire Fox Racing for $540 million.

Fox Racing, based in Irvine, CA, manufactures motocross, mountain bike and related lifestyle gear and moves Vista deeper into the adventure sports space in which the company has dabbled with its recently acquired QuietKat rugged e-bike brand and its cycling brands that include Giro, Bell, Krash, Copilot, and Raskullz.

With a 50-year history, Fox Racing forecasted it would generate $350 million in sales in the 2022 calendar year. Of those sales, motocross (MOTO) represents 44 percent of its product range, Mountain bikes (MTB) 33 percent and lifestyle 18 percent. Fox’s product range includes helmets, shorts, jerseys, guards, and pants in the MOTO and MTB categories. The lifestyle segment includes casual wear, utility and performance styles.

Fox Racing grew net sales by a compound annual growth rate of roughly 20 percent from the calendar year 2019 to 2021, with expected growth above that in the calendar year 2022.

On an adjusted basis, EBITDA for calendar 2022 is expected to reach $55 million, representing a 16 percent EBITDA margin.

Fox Racing will become Vista Outdoor’s 40th brand and will join Vista Outdoor’s Outdoor Products segment, which includes QuietKat and the cycling brands as well as CamelBak, Camp Chef, Bushnell, Bushnell Golf, Foresight Sports, and Stone Glacier.

“Fox Racing is an ideal fit for our portfolio with a reputation for high-quality helmets, protective gear and apparel for motocross and mountain biking,” said Chris Metz, Vista Outdoor’s CEO, in a statement. “Motocross and mountain biking are growing and familiar categories for Vista Outdoor. Fox Racing is synergistic to our existing action sports business unit, which includes Bell Helmets, Giro, Blackburn, Krash, Copilot, and Raskullz,”

Vista Outdoor did not hold an analyst call to discuss the acquisition but published a Fox Racing Acquisition Presentation that included many details and the rationale behind the purchase.

Vista said the acquisition “offers a compelling path to significant value creation” and cited four reasons in support of the acquisition:

1. Strong Secular Market Tailwinds

  • A large increase in MOTO participation during COVID provides a stable growth base in core MOTO categories.
  • Significant tailwinds in the MTB market, driven by backlogs, investments in trails/access and new categories, including E-MTB and Gravel.

2. Strongest brand in MOTO, gaining momentum in MTB

  • The strongest brand in MOTO with the highest customer advocacy/NPS and intent to buy.
  • Emerging MTB brand with momentum from retail and consumers.

3. Significant cost and revenue synergies 

  • Direct line to material cost and revenue synergies through improved sourcing and expanded sales channel access.
  • Significant upside in continuing to build a robust portfolio of Action Sports and Protection products.

4. Best-in-class management team 

  • High-quality and complementary management team with a strong founder’s mentality ethos.
  • Strong strategy, product roadmap and disciplined processes to capture opportunities.

Vista Outdoor said Fox Racing would expand Vista Outdoor’s presence and aligns with its current strategy of acquiring brands that have devoted consumer followings and strong product innovation capabilities.

Regarding synergies, the Fox Racing acquisition is expected to provide its retail partners with a deeper lineup of brands and a broader catalog of products. Vista Outdoor’s brands, together with Fox Racing, are expected to benefit from leveraging core competencies and enhanced supply chains. As in other past acquisitions, Fox Racing will benefit from Vista Outdoor’s buying power, established channels, large customer base, and access to capital.

Vista also said Fox aligns with Vista Outdoor’s values of workplace diversity and expanded access to outdoor sports. Finally, the acquisition provides more scale to the Vista Outdoor Products business ahead of the previously announced separation of Vista Outdoor Products from the Vista Shooting Sports business.

Vista estimates Fox Racing’s addressable market is $3.4 billion in MOTO and MTB gear and apparel and $130 billion in lifestyle gear and apparel. Growth is expected to be aided by broad trends favoring outdoor recreation, fitness, e-commerce, community, and lifestyle.

Fox Racing also cited third-party research that shows premium MTB gear and apparel (MTB helmets over $160, MTB jerseys over $150 and MTB shorts over $150) are forecasted to achieve 18 percent growth. The study also found that 82 percent of respondents expected to increase time spent on MTB’s and the overall MTB category to benefit from 2,000 miles of new MTB trails created in the U.S. since 2020.

Vista also noted that off-road MOTOs had achieved a 5 percent CAGR Since 2010 and 11 percent growth in side-by-side off-road vehicles on a CAGR basis in the same period. The third-party study also noted that dealers surveyed expected off-road bike sales to increase next year.

“The addition of Fox Racing to our portfolio will allow us to target multiple consumer demographics across mountain and road biking, skiing/snowboarding, and powersports,” said Metz. “We expect that Fox Racing and our legacy teams will find multiple opportunities to leverage core competencies, enhance supply chain efficiency and resiliency and better serve our customers and consumers to drive future growth.”

Vista expects to be able to accelerate growth in six ways:

1. Optimize Core Product Offering—Continue to capture share through elevated product and technical leadership across fit, form and function;

2. Expand Wholesale Presence—Strategically expand and enhance wholesale presence with its large base of retail partners;

3. DTC Leadership—Accelerate customer acquisition through owned retail and DTC;

4. Penetrate Performance Lifestyle Market—Leverage brand permission to penetrate the performance lifestyle market; 

5. Accelerate International Development—Capitalize on global opportunities leveraging its international distribution network; and

6. Pursue Actionable Adjacent Opportunities—Leverage technical expertise to accelerate growth in side-by-side ATV and other adventure sports.

“We believe that the combined platform will make each business stronger and more profitable tomorrow than they are today while allowing us to continue to deliver long-term returns for shareholders,” said Metz. “Following our separation, which was previously announced on May 5, we expect to be one of the largest outdoor recreation companies in the industry.”

Jeffrey McGuane, CEO, Fox Racing, will continue to lead the company following the close of the acquisition, as will all of Fox Racing’s leadership team.

“We’re excited to join the Vista Outdoor family,” McGuane said. “Together, we can leverage the heritage of our leading brands, enjoy new supply chain synergies, expand our deep and established channels and target an expanded customer base. Combined with enhanced access to capital for innovation and scale, we believe this transaction is a win-win for all involved. Vista Outdoor’s leadership team has proven they have an effective, repeatable acquisition model, making Vista Outdoor the clear acquirer of choice for Fox Racing. It is not often that an acquired company can remain true to its culture and customer base while also tapping into the benefits of Vista Outdoor’s Centers of Excellence, vast retail partnerships, innovation engines and a leadership team that enables a founder’s mentality and results-driven culture.”

Altamont Capital Partners own Fox Racing. Altamont originally invested in Fox Racing via majority recapitalization in 2014.

Vista expects to close the transaction in the second fiscal quarter of FY23, subject to the receipt of regulatory approvals and other customary closing conditions. 

Vista Outdoor agreed to pay a gross purchase price of $540 million, subject to certain customary closing adjustments and not including contingent incentives of up to $50 million, upon achieving certain EBITDA targets.

The transaction is expected to be immediately accretive to earnings, excluding transaction costs, transition costs, and inventory step-up. 

Following the transaction’s close, Vista Outdoor’s leverage ratio is expected to be below 1.5 times, within the target leverage ratio of one to two times.

Vista will provide further details when it reports its first-quarter results on July 28.

Photo courtesy Fox Racing