Too close to compete? Future unclear for Cabela’s after Bass Pro buyout
Sports outfitter Cabela’s Inc. on Monday agreed to be bought by Bass Pro Shops in a $5.5 billion deal.
The merger of the two giant outdoor-sports equipment retailers leaves a Cabela store in Lacey and a Bass Pro shop in Tacoma, less than 20 miles apart on Interstate 5.
The deal is a victory for the activist investor that had been pushing Cabela to put itself for sale. The offer of $65.50 a share in cash represents a 19 percent premium to Cabela’s most recent closing price, the companies said Monday in a statement.
Capital One Financial Corp. is acquiring Cabela’s credit card business for an undisclosed amount, according to a separate statement.
The deal, which unites two of America’s largest outdoors retailers, comes almost a year after Elliott Associates began pushing Cabela’s to consider a sale. The chain, which had built a following among hunters and outdoor enthusiasts, came under pressure after revenue and profit growth sputtered.
Cabela’s said in October of last year that “significant weakness” in its fall apparel and footwear contributed to a disappointing third quarter. Less than a week later, Elliott disclosed an 11 percent stake and said it would push for a shake-up. The company began a strategic review of its business in December.
A Bass Pro representative could not be reached Monday to comment on the future of the large-format Cabela’s store in Lacey, but the city’s finance director, Troy Woo, said the store represents a significant portion of the city’s sales tax revenue.
Woo would not disclose the specific amount of sales tax revenue generated by the store, citing state Department of Revenue rules.
The store falls into a “sporting goods, hobbies, music and books” category that generated $571,600 in sales tax revenue the past year, he said. That is the sixth largest sales tax revenue category for the city. Cabela’s likely represents the majority of that category.
And it’s not just the potential loss of sales tax revenue that’s a concern. There’s also local employment, and if the building becomes an empty shell, that creates challenges for redevelopment, Woo said.
When the 185,000-square-foot store opened in 2007, it employed 350 people. As of May 2014 the store employed 300, according to the Thurston Economic Development Council.
“It could be a big concern across many fronts,” Woo said.
Shoppers at Cabela’s on Monday expressed hope that the store would stay open.
“From what I understand they’ll still be two separate entities, so the competition will still be there,” said Cory Ragan of Gig Harbor, who was shopping with his wife, Ashley.
It also creates uncertainty about jobs in Cabela’s home state of Nebraska. The combined companies plan to keep some operations in Sidney and Lincoln, Nebraska, but it’s not immediately clear how many jobs might be lost.
Bass Pro opened its Tacoma store in the fall of 2014.
“We really are a tourist destination,” said general manager Ken Bruhn at the time.
Cabela’s has been in the region longer, opening its Lacey store in late 2007.
Cabela’s was founded in 1961 when Dick Cabela started selling fishing flies through the mail from his kitchen table with his wife, Mary, and brother, Jim, in Chappell, Nebraska.
Bass Pro was founded by Johnny Morris in 1972, working out of his father’s liquor store in Springfield, Missouri. Morris is worth about $3.3 billion, according to the Bloomberg Billionaires Index.
Morris developed a following in the Ozarks region — its lakes and rich streams a haven for anglers — created the Bass Pro Shop Catalog in 1974 and opened the first of his now 99 stores in Springfield seven years later.
Morris introduced the Bass Tracker fishing boat in 1978 that was designed specifically for fishermen.
Cabela’s has 85 retail stores. primarily in the western U.S. and Canada.
Morris said he hopes to continue growing the Cabela’s brand alongside his privately-held chain.
“The story of each of these companies could only have happened in America, made possible by our uniquely American free enterprise system,” Morris said. “We have enormous admiration for Cabela’s, its founders and outfitters, and its loyal base of customers.”
In winning the bidding for Cabela’s, Bass Pro beat out competition from private equity bidder Sycamore Partners, people familiar with the matter told Bloomberg.
CARD PORTFOLIO
Cabela’s credit card portfolio is issued by its World’s Foremost Bank subsidiary, which employs 700 people and is based in Lincoln, Nebraska. The retailer had about 1.9 million active accounts in 2015, a 6.8 percent increase from a year earlier, according to its latest annual report. The average balance on cards in the portfolio last year was $2,301, the company said.
Capital One didn’t disclose terms of the acquisition, which includes about $5.2 billion in credit-card receivables. In June, Citigroup Inc. paid American Express Co. about $1 billion for the Costco Wholesale Corp. portfolio, which included about $10.5 billion in credit-card receivables. McLean, Virginia-based Capital One said the deal won’t affect its plans to return capital to shareholders.
Capital One Chief Executive Officer Richard Fairbank has expanded the credit-card consulting firm he founded more than two decades ago into a diversified lender that ranks as the ninth-largest commercial bank by deposits in the U.S. A series of acquisitions – including retail card portfolios, energy investment banking and health-care lending firms – have spurred the lender’s growth.
The Olympian’s Rolf Boone, Bloomberg, The Associated Press and News Tribune archives contributed to this report.
This story was originally published October 3, 2016 at 3:05 PM with the headline "Too close to compete? Future unclear for Cabela’s after Bass Pro buyout."