ATK [ATK] yesterday said it has agreed to acquire Bushnell Group Holdings for $985 million in cash, a global provider of hunting and sports optics and other outdoor accessories, adding new products and customers to the company’s fast growing sporting business.
The acquisition would significantly alter the shape of ATK’s overall portfolio. After closure, ATK’s Sporting Group, which currently consists of ammunition, rifles and shotguns, and various tactical accessories, would account for 45 percent of the company’s revenue, and commercial and international business would make up 50 percent of the revenue.
Bushnell’s primary products are hunting and sports optics, including binoculars, rifle scopes, laser range finders, and spotting scopes, all of which make up more than 50 percent of sales. The Kansas-based company has 19 brands and also sells GPS systems, trail cameras, night vision optics, eyewear under the Bolle and Serengeti brands, and is a leader in the golf market for laser rangefinders to obtain yardage distances.
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| Bushnell AR Optics HiRise riflescope. Photo: Bushnell |
ATK said the deal price represents a multiple of 10 times 2013 earnings before interest, taxes, depreciation and amortization. The company expects the acquisition to be dilutive to its earnings per share (EPS) in the current fiscal year and then accretive to earnings beginning in FY ’15. By FY ’16, ATK expects Bushnell to add $1 to its EPS.
Bushnell, a portfolio company of the private equity firm MidOcean Partners, is expected to have $600 million in sales this year with about two-thirds of the business in the shooting sports. The majority of sales, 75 percent, are to customers in North America and the company has more than 10,000 customer accounts in over 90 countries, further expanding ATK’s international footprint.
In its most recent fiscal year, ATK’s Sporting Group posted sales of nearly $1.2 billion, representing 27 percent of the company’s overall sales.
Bushnell has been growing at about 17 percent annually the past several years, with 7 percent of the growth organic. That organic growth will help ATK’s overall sales amid a constrained federal spending environment and the company believes that it can take advantage of its existing distribution channels to further Bushnell’s and its legacy Sporting Group growth.
Mark DeYoung, ATK’s president and CEO, said on an investor call yesterday that he expects Bushnell’s various accessories to benefit from the surge in gun sales the past few years to new customers such as women and younger people. He said that those sales eventually lead to follow up purchases of things like scopes, holsters, gun cases and other accessories, all areas with offerings from Bushnell.
Despite the portfolio changing deal, DeYoung said that ATK also remains focused on its two other core businesses, aerospace and defense and will continue to invest in these.
“At the same time we’re mindful of the growth opportunities in the market,” DeYoung said. Right now those opportunities are in the sporting space and they include the chance to improve earnings and cash flow, he said.
Bushnell is a profitable company with strong cash generation, all of which will help ATK pay off its borrowings and continue returning cash to shareholders, DeYoung said.
Pending government approvals, ATK expects the deal to close either in its third or fourth quarter of FY ’14, which ends in March 2015. ATK has $900 million of financing in place and cash on hand to fund the acquisition.
Despite the hefty borrowing, ATK will continue its dividend payment and its existing $200 million share repurchase program, of which it has purchased $85 million worth of company stock, DeYoung said.
Bushnell’s financial advisers on the deal are Morgan Stanley & Co. and Robert W. Baird & Co.