The well-known hunting and fishing retailer Cabela’s (CAB, Financial) announced the company was being bought by privately held Bass Pro Shops on Monday.
The country’s two leading outdoor outfitters joined in a $5.5 billion deal. The Missouri-based Bass Pro Shops will pay $65.50 per share.
Cabela’s was put up for sale earlier this year at the urging of hedge fund Elliott Management, its largest shareholder. The board approved the deal, and it is now subject to approval by shareholders and regulators.
In a press release, Bass Pro Shops said it intends to “celebrate and grow the Cabela’s brand and will build on qualities that respective customers love most about Cabela’s and Bass Pro Shops.”
Cabela’s was founded in 1961 by Dick, Mary and Jim Cabela. The company is a popular marketer of hunting, fishing, camping, shooting sports and other outdoor merchandise. The company is headquartered in Sidney, Nebraska.
Cabela’s has a market cap of $4.3 billion with an enterprise value of $8.5 billion. It has a price-earnings (P/E) ratio of 24.03 with a forward P/E of 17.9. Its price-book (P/B) ratio is 2.24, and its price-sales (P/S) ratio is 1.1.
GuruFocus ranked Cabela’s financial strength 5 of 10. Its Piotroski F-Score of 5 indicates it is in stable financial condition. Its Altman Z-Score ranks in the distress zone, meaning the company could have faced bankruptcy if it had not been bought by Bass Pro Shops. The cash-debt ratio of 0.11 is below the industry median of 0.94 and is ranked lower than 87% of other companies in the industry.
GuruFocus ranked the company’s profitability and growth 7 of 10. It has an operating margin of 7.5% and a net margin of 4.44%. Its return on equity (ROE) of 9.9% ranks higher than 64% of its competitors. Its return on assets (ROA) of 2.23% ranks below 53% of other companies. Cabela’s three-year revenue growth of 9.1% ranks higher than 75% of its competitors. Similarly, its three-year earnings per share growth of 3.3% ranks higher than 56% of other companies in the global specialty retail industry.
The DCF Calculator gives Cabela’s stock a fair value of $44.78; it was trading at $63.3 on Tuesday.
Among the gurus invested in Cabela’s, Paul Singer (Trades, Portfolio) is the largest shareholder with 6,371,496 shares. He owns 9.3% of outstanding shares, which is 2.8% of his total assets managed. Other gurus involved in the company are Sarah Ketterer (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Private Capital (Trades, Portfolio), Jim Simons (Trades, Portfolio), Keeley Asset Management Corp (Trades, Portfolio)., Ruane Cunniff (Trades, Portfolio), PRIMECAP Management and Murray Stahl (Trades, Portfolio).
According to the press release, shareholders in Cabela’s will be provided with “a premium of 19.2% to Cabela’s closing share price on Sep. 30, the day prior to announcement of the transaction, 39.7% to the closing share price on Dec. 1, 2015, the day before Cabela’s announced its exploration of strategic alternatives and 57.1% to the 90-day volume weighted trading average prior to Dec. 1, 2015.”
In addition, upon the closing of the deal, Bass Pro Shops announced it will enter an agreement with Capital One to service the Cabela’s CLUB and Cabela’s co-branded credit card. Bass Pro Shops will maintain the integration between the credit card program and the combined companies’ retail operations and customer relations. The transaction will not affect customer rewards points for either entity.
The deal is expected to close in the first half of 2017.
Disclosure: I do not own stock in any companies mentioned in the article.
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