CamelBak and owners Kransco Group, a San Francisco-based holding company, today announced the sale of CamelBak to Bear Stearns Merchant Banking, a dedicated private equity arm of Bear, Stearns & Co., for $210 million. The deal is expected to close just before Thanksgiving.
The official announcement of the sale by the company and representatives of the Bowes family, owners of the Kransco Group, confirms what SNEWS has known for several weeks, but refrained from speculating about in print out of respect for CamelBak and its ongoing negotiations.
SNEWS first reported CamelBak was being offered for sale in July 2003 by broker J.P. Morgan & Co. At that time, there were many suitors, but the likes of VF Corp. and others quickly pulled out of the running as the valuation became too rich. By September, there were only four or five players still in the game, all from the industrial and investment arena.
Insiders close to the deal told SNEWS that the selling price is approximately 2.8 times estimated 2003 revenue and around 8.2 times EBITDA. However, officials at CamelBak and Bear Stearns (NYSE: BSC) would not confirm the exact numbers used for the calculation of the selling price. Bear Stearns Senior Managing Director Rick Perkal told SNEWS that the deal was straight cash with no assumption of debt.
When SNEWS asked what Bear Stearns saw in CamelBak, Perkal said that the firm saw an "unbelievable company" that was undeniably the leader in the portable hydration category. However, he said Bear Stearns noticed CamelBak had very low penetration into numerous potential markets. To Perkal and Bear Stearns, that means untapped potential for huge growth in the future -- for a company that already has grown by leaps and bounds.
Analysts and insiders in the financial community have estimated that Bear Stearns would invest some $90 million of equity capital into CamelBak.
SNEWS has also learned the other senior managing director in charge of putting the deal together, Bo Arlander, is an avid triathlete and has competed in seven consecutive Ironman triathlons, leaving little doubt she is familiar not only with the category but also with CamelBak.
A look back into the SNEWS archives shows we reported in July of 1995 that Kransco (owned by John Bowes and John Rosenkrans) had finalized the purchase of CamelBak -- then named FasTrak Systems -- for a mere $4 million according to sources at Kransco at that time. Woody Scal (who joined CamelBak in 1999 and is now the company's senior vice president of marketing) was then with Kransco as vice president of business development and marketing; he told SNEWS in 1995 that Kransco's strategy would be to take "a superior hydration system and put it into configurations that are ideal for a range of different sports and needs."
As of this moment, Kransco has no other investments in its company portfolio; however, company representative Owen Blicksilver did confirm to SNEWS that another acquisition is forthcoming, although not in the outdoor industry. "John (Bowes) is open to a broad range of deals, including outdoors," Blicksilver said.
CamelBak representatives, who talked to SNEWS before talking to any other news source on Nov. 6, told us that the company would remain in Petaluma, Calif. In addition, with the new investment, the company would add staff to handle new markets and would continue to develop technology for a wide range of hydration products.
"The new resources will help us to enhance manufacturing and sourcing capabilities, improve product availability, expand our marketing reach to new customers, and ultimately create more demand for our product," Glenn Ross, president and CEO of CamelBak told SNEWS.
SNEWS View: Talk about your fantastic return on investment! A selling price of $206 million more than Bowes paid for it? Of course, Bowes poured plenty of money early on into the company to ramp up R&D and to begin outsourcing manufacturing to Asia. Little doubt Bowes, now 75 years old by our estimates, is one happy man. Woody Scal has to be smiling too, not because he made money on the deal, but because he saw the potential for the company back in 1995 when he helped Kransco put together the deal. As a side note to watch, it has been rumored that Rudolph Giuliani, chairman and CEO of Giuliani Partners, was part of this deal. For the record, the former New York mayor has formed a strategic alliance with Bear Stearns Merchant Banking to pursue private equity investment opportunities in the defense, security and public safety sectors. And, yes, Rick Perkal is part of that deal too; however, insiders tell us that Giuliani, while offering consulting advice on the CamelBak purchase, is not connected in any way to the investment. We would not be surprised to learn, though, that Giuliani becomes involved in some way down the road, chiefly because of the importance CamelBak plays in the military sector. As for the rumblings in the investment chat rooms that CamelBak is a "one-trick pony," we report that we feel otherwise. We know of several very interesting and very marketable projects CamelBak already has in the works with the military market that will soon find their way onto the consumer side. Our bet is the CamelBak team will continue to find ways to lead the market and drive growth through innovations and by expanding the distribution of current offerings. Meanwhile, with Kransco holding a currently empty portfolio, it would not surprise us to see that firm once again dabbling in the recreation market.