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Bass Pro Shops


A merger resulting in a national outdoor-sports gear chain with more than 180 locations and around 40,000 employees was just announced Monday.

The acquisition of Cabela’s Inc. (:CABN/A) by privately owned Bass Pro Shops will involve the outlay of about $4.5 billion in cash or $65.50 per share paid to Cabela’s shareholders.

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Mega Plus Mega Equals Mega Plus

This merger, if approved, would create a combined company that would control more than 20% of the $50 billion per year U.S. hunting, camping and fishing market according to Jim Duffy, Stifel analyst.

Both Cabela’s and Bass Pro Shops are well-known for their huge stores filled with hunting and fishing supplies, gigantic aquariums, hundreds of examples of taxidermy wildlife, restaurants and more.

Sometimes Mega Isn’t Enough

Despite the scope of both chains’ stores, competition from online retailers like Amazon.com (NASDAQ:AMZNC), the world’s largest discount retailer Wal-Mart Stores Inc. (NYSE:WMTD) and others in the sporting goods space like Dick’s Sporting Goods Inc. (NYSE:DKSC) are the reason Cabela’s finally decided to sell.

As a result, cost-cutting and restructuring failed to convince activist investor Elliott Management Corp. that anything short of a sale would solve the chain’s problems.

Market Reaction

Cabela’s stock closed Monday at $63.18, up $8.25 or 15.02% from its opening price of $62.98 and only $2.32 short of Bass Pro Shop’s offer price.

Bass Pro Shop’s offer represents a 19.2% premium on Cabela’s closing price Sept. 30 and a 39.7% premium on the closing price Dec. 1, the day before news that Cabela’s was considering strategic alternatives first broke.

Volume for the day Monday was 18.5 million shares. Average daily volume for CAB is 668,000 shares.

Industry And Regulator Expectations

Although Bass Pro Shops and Cabela’s mostly operate in different parts of the country, some areas such as Texas, Missouri and Kansas have overlap and that might raise antitrust concerns.

In a research not, D.A. Davidson & Co. said, "Both Cabela's and Bass Pro Shops used promotions to drive store traffic and market share, especially in contested geographic regions. As a combined entity, we see potential for a more rational promotional environment to emerge, benefiting all industry participants."

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Meanwhile At Dick’s And Others

As the Bass Pro Shops/Cabela’s deal unfolded, others in the sporting goods space were a mixed bag with Big 5 Sporting Goods Corp. (NASDAQ:BGFVB) closing up almost 1.7% at $13.85 Monday with Zacks rating the stock a Hold.

Dick’s Sporting goods, meanwhile, dipped 1.39% to $55.93 as the company named new CFO, Lee Belitsky who replaces interim CFO, Andre Hawaux. TheStreet rates Dick’s a Buy.



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