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Gart Sports courts TSA
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July 2, 1998: 4:17 p.m. ET
Sports retail chain seeks 'strategic combination,' counters Venator bid
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NEW YORK (CNNfn) - Adding a little extra sugar to a rival offer by Venator Group, Gart Sports Co. said Thursday it had proposed a "strategic combination" with The Sports Authority Inc., offering $20 per share for 70 percent of the sporting-goods superstore chain's stock but a 49 percent ownership stake.
Under the combination formula, Gart would pay about $441 million for 22.05 million TSA shares, 70 percent of TSA's 31.5 million outstanding shares. Gart Sports has 7.8 million shares outstanding.
The offering price represents a premium of $3.50 per share, or $77.18 million, based on The Sports Authority's (TSA) closing stock price Thursday of 16-1/2 in composite trade on the New York Stock Exchange. That was up 1-3/8 from the previous close. Shares of Venator Group (Z) ended up 11/16 at 20-7/8.
On May 7, Venator Group -- formerly Woolworth -- agreed to merge with TSA, the nation's largest sporting goods retailer, for about $579.6 million in stock plus the assumption of $179 million in debt. Two shareholders of TSA subsequently filed a class action lawsuit, alleging the acquisition price undervalues Sports Authority.
The suit sought to block the transaction.
In a letter sent Thursday to TSA Chairman and Chief Executive Officer Jack Smith, Gart Sports proposed an alliance under which 70 percent of TSA's outstanding shares would fetch $20 a share. The rest of the shares would remain outstanding and represent a 51 percent ownership stake in the combined company.
In the letter, Douglas Morton, Gart Sports' chairman, president and CEO, said "We believe that your shareholders would be better served by continuing to hold an ownership position in a pure-play sporting goods superstore retailer rather than a retail conglomerate."
With $700 million in revenues in 1997, Denver-based Gart Sports is the second- largest sporting goods retailer in the United States, operating 122 stores in 16 states under the Gart Sports and Sportmart name.
Morton added in his letter: "In addition to representing substantially higher value than the existing Venator Group offer, the combination of Gart Sports and The Sports Authority would create a nationwide sporting goods superstore retailer with approximately $2.5 billion in revenues, and the opportunity to create significant operational efficiencies."
Gart Sports said its proposal has "the full support" of the company's two principal shareholders, Leonard Green & Partners, L.P. and the Hochberg family.
TSA operates more than 200 stores that carry brand-name athletic apparel and footwear, cycling equipment, fitness accessories, fishing equipment, hiking gear, sunglasses and racquets. The company, based in Fort Lauderdale, Fla., had revenues of $1.46 billion in its most recent fiscal year, ended in January 1998.
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