Leonard Green in $1.3bn retail take-private

Leonard Green & Partners has agreed to take The Sports Authority private in a $1.3 billion (€1.06 billion) deal. The acquisition of the sporting goods retailer is valued at $37.25 per share, representing a 20 percent increase over its stock price at the close of trading last week.

Los Angeles-based Leonard Green is already quite familiar with the sporting goods space and, more specifically, The Sports Authority. The firm had acquired its competitor Gart Sports in 1992 through the acquisition of retail conglomerate Thrifty. Leonard Green then spun out the Gart Sports business a year later and eventually floated the company in a 1998 IPO. Five years later, Gart was then merged with The Sports Authority, and Leonard Green became a large stakeholder in the combined company.

As of the most recent annual report, issued by The Sports Authority this past summer, Leonard Green had held a 9 percent stake in the business, and Jonathan Sokoloff, a managing partner at the firm, currently sits on the company’s board.

Leonard Green has traditionally been an active player in the retail space, and has made past investments in companies such as Petco Animal Supplies, White Cap Industries and FTD Group, among others.

Calls to Leonard Green were not returned by press time.

The firm is currently investing out of its fourth fund, Green Equity Investors IV, LP, a $1.85 billion vehicle. Banc of America and TCW/Crescent Mezzanine will provide debt financing for the deal, which reportedly will make up around $300 million of the purchase price.

The transaction is expected to close in the second quarter, and most of the analysts that cover the company’s stock do not expect a higher bid to emerge. Harris Nesbitt research analyst Sean McGowan, for instance, said in a note to clients that given “the current competitive and operating challenges” at the company, he does not anticipate other bids to emerge “with a meaningfully superior offer”.

However, McGowan does add the premium being paid should not be considered excessive, especially considering that the stock was trading as high as $34 a share this past November.

Merrill Lynch served as financial advisor to the Sports Authority in the deal.