ATK yesterday [ATK] said it has agreed to acquire Caliber Company, a parent of a company that makes rifles and shotguns for hunting and sporting customers, adding guns to its mix of products serving the sporting community.
ATK said it would pay $315 million in cash for Caliber, which is the parent of Savage Sports Corp., although the final price is subject to working capital adjustments. ATK will use existing cash and its credit facility to finance the deal.
Caliber’s financial details were not disclosed but ATK said the purchase price represents a trailing multiple of 5.5 times earnings before income taxes, depreciation and amortization for the 12 months ended March 31. ATK said the acquisition would be accretive to earnings in its current fiscal year, which began April 1. The investment banking firm Jefferies estimates that the deal will add 25 cents earnings per share to ATK’s FY ’14 income.
The deal is expected to close by June 30 pending regulatory approvals.
The acquisition bolsters ATK’s already strong Sporting Group, the only segment of the company that posted revenue gains last year and generated significant profit growth (Defense Daily, May 3). ATK’s Sporting Group sells commercial ammunition and various sporting and tactical accessories.
“This acquisition will complement ATK’s growing portfolio of leading consumer brands,” Mark DeYoung, ATK’s president and CEO, said in a statement. “This opportunity will allow us to build upon our offerings with Savage’s equipment, respected brands known for accuracy, quality, innovation, value and craftsmanship.”
DeYoung also stated that Savage’s sales distribution channels and products will expand ATK’s presence with distributors, retailers and consumers.
“There are synergies in distribution, with both companies selling through similar channels and to many of the same customers,” Jefferies aerospace and defense analyst Howard Rubel says in a note to clients. “We believe that the current Caliber Company’s operations are fairly efficient, and the acquisition does not appear to be a fixer-upper.”
Most of Savage’s customers are in the hunting and sporting markets, although the company does a small business with the law enforcement community. Rubel notes that the company’s guns don’t include assault weapons, which have been under intense scrutiny for increase regulation. He also says that the Caliber acquisition makes it “highly unlikely” that ATK will seek to purchase firearms and related sporting goods manufacturer Freedom Group, which reportedly has been an interest of ATK’s.
Savage has been manufacturing firearms for more than 100 years. The company also makes shooting range systems and the Bowtech line of hunting and target bows. The company has more than 600 employees and is located in Massachusetts and Ontario, Canada.
ATK said no personnel decisions have been made yet regarding Savage’s management.
Caliber is a portfolio company of the private equity firm Norwest Equity Partners. Wells Fargo served as Norwest’s financial adviser on the deal.