Three years after first approaching Teachers’ Private Capital with an offer to invest in a sporting goods company, Fenway Partners finally corralled the Canadian private equity firm this month. The two teamed up in a $400 million deal to merge Easton Sports with Riddell Bell Holdings. Teacher’s invested $135 million to take a 30% stake in the combined company, Easton-Bell Sports.
Jim Leech, who directs Teachers’ private equity investments from Toronto, said he turned down Fenway’s offer in 2003 to help buy Riddell, the maker of football helmets and other sports gear, because the $100 million acquisition was too small. Teachers has roughly $15 billion at its disposal. “I don’t think we can invest less than $100 million,” Leech said.
Fenway bought Riddell and later merged it with Bell Sports, bringing its total equity investment to $150 million, said Mark Genender, a managing director at Fenway in Los Angeles. Even before the most recent acquisition, the company represented Fenway’s largest equity investment from its $909 million fund. Most private equity firms refuse to invest more than 10% of a fund in any one portfolio company. Because Fenway wouldn’t risk any more equity, it called on Teachers again last fall. Genender likes the Canadian firm’s blend of experience in brand-name companies and sports. Teachers has acquired Samsonite, Serta and Yellow Pages Group and is also the majority owner of the Toronto Raptors and the Toronto Maple Leafs.
Easton hired Wachovia Securities to conduct a limited auction last summer. Genender said Jim Easton, working with Wachovia’s Sam Farnham and Joe Pellegrini, hand-picked the bidders, excluding firms he didn’t trust. Making the process trickier, Easton made it clear he wouldn’t sell to anyone who planned on putting too much leverage on the company. “His company had no debt,” Genender said. “He wanted to make sure it wasn’t just a financial play.”
Easton-Bell has more than $600 million in annual revenue. Fenway owns a majority stake. Jim Easton and York Street Capital Partners, a mezzanine investment fund sponsored by Teachers, hold smaller stakes. Easton will have a seat on the board along with Peter Ueberroth, the former commissioner of Major League Baseball, and Billy Beane, general manager of the Oakland Athletics.
The precise terms of the acquisition weren’t disclosed at Easton’s request. Wachovia and Goldman Sachs were joint book runners for $415 million in senior credit facilities. The proceeds will be used for the transaction and to refinance a portion of Riddell Bell’s debt. Genender said Riddell Bell’s existing high-yield notes will remain outstanding.