In a much-anticipated and long-rumored transaction, Gart Sports Co. (GRTS) and Sports Authority Inc. (TSA) have agreed to merge, creating a $2.5 billion national sporting goods giant -- the largest in the U.S. market -- that could quickly dominate sporting goods sales and will better position them to compete against large discount department stores such as Target and Wal-Mart.
The post-merger company will be called Sports Authority Inc. and be headquartered in Gart's hometown of Englewood, Colo. The chain would have 385 stores in 45 states, combining Gart's 181 stores and TSA's 204 stores. Both had been planning growth, with Gart saying last month it planned another 15 stores this year after already opening eight in 2002. The long-term goal, they say, is to have a unified national brand under the name, Sports Authority, but that could take several years.
"We've talked on and off," Douglas Morton, president and chief executive of Gart Sports, told Dow Jones Newswires. "The timing was just right. Probably over time, we got some of the egos out of the way."
In a joint press release Feb. 20, the companies said each Sports Authority share will swap for 0.37 of a Gart share -- a ratio identical to the stocks' closing prices on Feb. 19. The New York Stock Exchange-listed shares of Sports Authority closed Wednesday at $5.51, and Gart shares last traded at $14.88 in Nasdaq activity. Ownership of the new company will be split equally between the two companies' shareholders.
Neither company has reported final 2002 results. For the first nine months of their fiscal years, Gart had revenue of $734 million and Sports Authority, based in Ft. Lauderdale, Fla., posted $1.03 billion in sales.
After the merger, Sports Authority Chairman and Chief Executive Martin Hanaka is inline to become the chairman of the new company. Morton will become vice chairman and chief executive of the new Sports Authority.
Hanaka said in the press release Feb. 20 that a combination with Gart Sports would provide economies of scale, improved purchasing ability and an expanded distribution network. Gart has a foothold in the western United States, while Sports Authority is stronger in the East. Both are growing their private label business, and both do about half of their business in hardlines. The deal is expected to close in the third quarter.
SNEWS View: Wow. What else can we say? Sure, this has been the rumor du jour for, well, a lot of "jours" now, so it's not truly a surprise. But heeeeelloooo reality. Suddenly this one company will have huge buying power, huge consumer influence, huge power over suppliers and huge branding ability. Not only that, suddenly popular specialty-oriented brands that have been present in one chain will be available to the entire chain. Good for some consumers, perhaps, but that may also leave some manufacturers in a quandary with their other established dealers. What company could or would say "no" to such power? But what will that then mean to specialty dealers who are already hard-pressed to compete?