Fox Racing Receives Awesome 10x EBITDA Acquisition Offer By Vista Outdoor (NYSE: VSTO)

In early July, Vista Outdoor (NYSE: VSTO) announced it plans to acquire Fox Racing for $540 million plus an additional potential $50 million earnout based on financial and operating performance. Below is a management presentation:

The acquisition will be the largest acquisition to date for Vista, which plans to fund the deal using mostly debt via an asset-based revolving line of credit and a secured term loan, per Bicycle Retailer and Cycle News, which referenced the SEC Form 8-K filing.

Vista Outdoor

Based in Minnesota, VSTO is a publicly-traded conglomerate/holding company of outdoor and sporting goods brands and companies. It has an enterprise value of about $2.3 billion.

Select Vista Brands

• CamelBak (Petaluma, CA; hydration products)
• Bushnell (Overland Park, KS; binoculars)
• Champion Target (Richmond, IN; hunting implements accessories)
• Bell Helmets, Giro, Blackburn, and QuietKat

Fox Racing

Based in Southern California (Irvine and Tustin areas), the company makes helmets, gloves, pants, guards, and apparel oriented to motocross and mountain biking.

Fox Factory

Duly note: Fox Racing separated from Fox Factory — the suspension business line¹ Fox Factory makes suspension components for motorcycles, automobiles, all-terrain vehicles, snowmobiles, and mountain bikes. — way back in the late 1970s. Since 2013, Fox Factory, based in Duluth, GA, has been a publicly traded company (Nasdaq: FOXF) with an enterprise value of about $4.0 billion.

And, since 2014, FOXF has acquired seven or more companies, which includes an assortment of suspension brands and motorized vehicle-related businesses:

• Sport Truck USA (suspension kits), Coldwater, MI
  • BDS Suspension
  • Zone Offroad
  • JKS Manufacturing: Jeep specific suspension kits
• Race Face, Vancouver, B.C.
• Easton Cycling
• Marzocchi (Bicycles)
• Tuscany Motors, Elkhart, IN
• RideTech, Jasper, IN
• SCA Performance, Trussville, AL
• Outside Van, Portland OR

Acquisition Valuation Multiple

Fox Racing expects 2022 full calendar year revenues of about $350 million and EBITDA of about $55 million (see the prior Cycle News link). Since 2019, top line growth has been about 20% per year on a compounded annual growth rate (CAGR) basis.

So, according to the $540 million anticipated purchase price, the Enterprise Value/EBITDA multiple will be roughly 10.0x to 11.0x, depending on the earnout amount.

Closing Words

Now you. What is your opinion of this pending acquisition in the outdoor sports, motocross, and mountain biking sectors?

We find the brands and sectors appealing. They include components and accessories for motorized vehicles² (through Fox Factory) such as Jeeps, trucks/cars, and motorcycles, in addition to bicycles/components.

Also, these sectors/brands align well with our fearless leader, who owned a Jeep and rides commuter and mountain bikes, and had (still has?) a Honda Magna v65/1100cc motorcycle with a racing engine in it (he only drives 55 mph, though, for the record).

In closing, if you are intrigued about divesting or acquiring a company, then reach out via our contact form or email.