EXEC Chairman of BDE’s Parent Makes Bid To Acquire Its Ammo Business

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Chairman of BDE’s Parent Company Proposes Acquisition of Its Ammunition Division

Warren Kanders, Clarus Corp.’s Executive Chairman and Largest Shareholder, Proposes Acquisition of Precision Sports Segment for $160 Million

Clarus Corp.’s executive chairman and leading shareholder, Warren Kanders, has submitted a non-binding bid to acquire the company’s Precision Sports segment, encompassing the Sierra Bullets and Barnes Bullets brands, for a total of $160 million. Analysts are closely watching this development, as its success hinges on whether Clarus can potentially achieve a higher stock multiple as it transitions into a more outdoor-focused enterprise.

The announcement of this bid was made via a regulatory filing, accompanied by a letter from Kanders outlining the advantages for Clarus. In his letter, Kanders, who owns 15.4 percent of Clarus’ shares, underscored that the offer would furnish Clarus with ‘immediate financial flexibility’ by providing cash proceeds exceeding existing obligations for bank debt.

The proposed offer comprises $140 million in cash available at closing, with an additional $20 million provided through a seller note. Kanders believes that with the Precision Sports segment divested, Clarus can refocus its efforts on its remaining core businesses—the Outdoor segment (Black Diamond) and the Adventure segment (Rhino-Rack and Maxtrax), both of which have undergone recent leadership changes.

Kanders stated, ‘I believe that the proposed transaction will bring significant near-term value to shareholders and enable the company to focus on its attractive organic growth initiatives in its Outdoor and Adventure segments where it has excellent leadership in place with Neil Fiske and Mat Hayward, respectively. Without the constraints of leverage, the company will be free to pursue strategic and accretive M&A opportunities.’

Furthermore, Kanders noted that shedding the Precision Sports segment would spare Clarus from the ‘added regulatory and political scrutiny that comes with also operating’ an ammunition business.

Crucially, Kanders did not request an exclusivity commitment from Clarus, anticipating that the company would explore alternative transactions as they work towards a definitive agreement. He has expressed readiness to enter into a binding agreement within the next 30 days, with the transaction targeted for closing by the fourth quarter. Kanders has urged Clarus’ board to form a special committee of disinterested and independent directors to evaluate the offer or any other potential transactions.

This development unfolds against a backdrop of declining shares for Clarus over the past two years, attributed to elevated inventory levels in the market due to supply chain challenges and weakened demand. In August, Clarus Corp. lowered its yearly outlook after second-quarter results fell short of analyst expectations.

The offer from Kanders coincides with recent management changes at Clarus, including the appointment of Neil Fiske as president of Black Diamond and Mat Hayward to head the Australia-based Adventure business. These changes come as Clarus seeks to adapt and thrive in a challenging market environment.

While some analysts view the potential divestiture of the Precision Sports segment as an opportunity to strengthen Clarus’ balance sheet and attract new investors, others express reservations about its impact on the company’s earnings. The proposed terms of the deal value Precision Sports close to its publicly held peer, Vista Outdoor. However, the Precision Sports segment has historically been a highly profitable component of Clarus’ portfolio.

The fate of this proposal and its implications for Clarus’ future trajectory remain to be seen, with investors and analysts closely monitoring developments.

References

sgbonline.com/exec-clarus-chairman-makes-bid-to-acquire-precision-sports-business/

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