Cabellas and BPS

Cabela’s Says BPS Deal Not In Danger
from The Fishing Wire

When Cabela’s made some mandatory regulator filings last Friday, they kicked off another round of conversations as to the likelihood of the proposed $4.5 Billion buyout of the retailer by Bass Pro Shops.

As expected, Cabela’s (NYSE:CAB) stock took an immediate hit, but closed trading yesterday at $58.83/share, gaining back another 28 cents of that drop. That’s still well below the $65.50/share deal price offered by Bass Pro Shops’ Johnny Morris.

So what’s up?

Regulators are covering their own flanks by looking more closely at the deal that would create a mega-outdoor chain with more than 180 stores and 40,000-plus workers. The combination Cabela’s/BPS could control as much as twenty percent of the $50 billion U.S. camping, fishing, hunting and shooting market. That merits some closer examination.

As I reported before the end of the year, it’s not unusual for regulators to look at the impact to the competitive marketplace when big mergers and acquisitions happen. When individual retail markets are impacted- and there are many locations where BPS and Cabela’s both have stores, there are repercussions from this kind of deal. It’s not unusual for regulators to ask that the combined entities consider modifications in their store configurations to account for reduced competition.

The concern at this point, however, might lie in the financial arm of the deal.

Capital One Financial Corporation, the buyer of Cabela’s credit card business, says that while the Office of the Comptroller of the Currency (which regulates the financial transaction) has indicated it will likely approve the deal -but that approval “probably” won’t come before mid-October.

That could pose a problem as the walk-away date for the primary deal falls on October 3, 2017. And the Capital One portion is contingent on the acquisition completing first.

We hear through Wall Street that all parties and their representatives are working to get the deal completed, but Cabela’s has said it was exploring “alternative structures” for the deal to allow for a closing before the October deadline.

What’s the alternative? No one’s talking to us from either side of the deal, but analysts say the alternatives could range from a voluntary extension of the deadlines to price concessions should the approval not come as expected.

With the spread between the current stock’s trading range and the $65.50/share offered by BPS ranging from $6-$7/share, the other side of the deal might also be considering an “adjustment” as a possible bargaining chip should regulators elongate the process.

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