Hockey equipment maker Bauer Performance Sports Ltd. is opening itself up to new investors with an initial public offering - a rare non-resource deal in a market that has been dominated by oil, gas and mining.
The IPO is expected to raise $75-million, sources close to the deal say, and proceeds will go to Bauer's owner, private equity fund Kohlberg Sports Group Inc. KSGI is run by Jerome Kohlberg, a co-founder of private equity giant Kohlberg Kravis Roberts & Co. He is said to be interested in selling a 20-per-cent stake in Bauer, which would put its total valuation at around $375-million.
The offering echoes IPOs from companies such as Dollarama, which have strong brand names and influential private equity investors. Bain Capital, for example, sold its first chunk of Dollarama to the public in October, 2009, and has since returned to the market three times to sell more of its stake.
Since mid-November, equity markets have been on fire and new issues have been rampant, giving KSGI enough confidence to try to cash in on part of its investment. In 2008, KSGI bought Bauer from Nike Inc. in a deal worth $200-million (U.S.) - about half what Nike paid for the company 13 years earlier.
At the height of the recession in fiscal 2009, Bauer posted a $19-million (Canadian) loss. But the past 12 months have been encouraging, with $283-million in revenues and a $16-million profit (after adjusting for restructuring charges related to Nike's sale).
Bauer estimates the global hockey equipment market was worth $555-million in 2010, and projects an annual growth rate of 1 per cent to 2 per cent, according to the IPO filing. Hockey skates and sticks accounted for 62 per cent of its 2010 sales.
Bauer's North American revenues are split almost evenly between Canada and the U.S., with 39 per cent from Canada and 35 per cent from south of the border.
The company says it holds the top market share for almost every key piece of hockey equipment, including skates and helmets. But the IPO filing shows that when it comes to sticks, Bauer runs second to Easton-Bell Sports. Reebok International Ltd., which owns CCM-branded equipment, is the other main rival. (When KSGI bought Bauer, it agreed to use the Nike Bauer trademark on existing products for up to two years.)
Last year, Bauer paid $5.5-million (U.S.) in endorsement contracts to players such as Jonathan Toews of the Chicago Blackhawks and New York Rangers goalie Henrik Lundqvist. Despite such deals, and its dominance in the equipment market, Bauer's celebrity endorsements pale in comparison with Reebok, which has high-profile stars such as Sidney Crosby of the Pittsburgh Penguins.
Bauer, which was formed in 1927 in Kitchener, Ont., was the first company to design a skate with the blade attached to the boot. The company was snapped up by Nike in 1995 for $395-million (U.S.) as inline skating took off in the United States. That fad faded but Bauer still operates a small roller hockey business unit, as well as a Maverik lacrosse equipment line.
RBC Dominion Securities and CIBC World Markets are co-leading the IPO, which puts them in charge of marketing the company to investors.
Hockey maker Bauer is going public, allowing ordinary investors to scoop up 20 per cent of the company for $75-million. The company's regulatory filing for the deal was released Friday, offering the following nuggets of information:
Amount Bauer spent on endorsement contracts in 2010 for players such as Chicago Blackhawks captain Jonathan Toews. Rival Reebok (which also owns CCM) endorses Pittsburgh captain Sidney Crosby and Washington Capitals captain Alexander Ovechkin.
Bauer's market share position in every line of hockey equipment except for sticks. Easton-Bell Sports controls that market, with Bauer coming in second.
Percentage of NHL players who use Bauer skates, according to management estimates; 42 per cent use Bauer helmets.
Percentage of Bauer's revenue coming from Canada.
Amount paid by Nike to purchase Bauer in 1995.
Amount Nike sold Bauer for in 2008.