Sports Authority In $1B-Plus Sale

The transaction, approved unanimously by the Sports Authority board of directors, is expected to close in the second quarter, subject to approval by the company's shareholders and customary regulatory approvals. The $1.3-billion transaction total includes $1 billion in equity and $300 million in debt.

The Sports Authority, which operates one of the nation's largest full-line sporting goods chains, does business under the names Sports Authority, Gart Sports and Sportmart. It also operates a website. Leonard Green & Partners, based in Los Angeles, is a private equity firm that specializes in deals like the Sports Authority buyout and manages approximately $3.7 billion of private equity capital.

The Wachovia report notes that the deal price of $37.25 per share is a premium of 20% over the Sports Authority closing price on Jan. 20 and also is a price that "appears in line with recent retail acquisitions." The "market perform" rating means that Wachovia believes that the stock's total return will be in line with the market over the next 12 months.

Gordon Barker, chair of the special committee of Sports Authority's board of directors that approved the transaction, says that the cash premium "reflects the success of" the merger of its brand with Gart Sports. The company "will also be conducting a market test for the next 20 days to ensure that the transaction is the best available for our shareholders," he says.

According to Doug Morton, chairman and CEO, taking the company private will provide it with "greater flexibility to accomplish its long-term goals." Leonard Green & Partners has significant past experience in the sporting goods industry from its ownership of several like retailers and also has a track record of providing strong financial and strategic support for the companies it acquires, Morton says.

Merrill Lynch is acting as financial advisor for Sports Authority in connection with the merger and with Banc of America Securities LLC is acting as financial advisor for Leonard Green & Partners. Bank of America N.A. and TCW/Crescent Mezzanine have provided commitments for the debt portion of the financing.