Bauer IPO

[mykty13 0]

Couldn't find anything posted on here (not sure if it's even the right forum) but this is obviously huge news for the company. Sure the younger guys don't care or understand the importance (as I wouldn't have either), but would like to hear what guys more plugged into the industry think or have heard.

Bauer IPO

I'd be willing to take a position, as a fan and believer in the future of the HOCKEY company...but could see how this could end up being a problem for the company in the far out future (stock holders want to see company growth, they expand into other sports, hockey line starts to suffer, etc, etc, etc...)

[Jordan 13]

Couldn't find anything posted on here (not sure if it's even the right forum) but this is obviously huge news for the company. Sure the younger guys don't care or understand the importance (as I wouldn't have either), but would like to hear what guys more plugged into the industry think or have heard.

Bauer IPO

I'd be willing to take a position, as a fan and believer in the future of the HOCKEY company...but could see how this could end up being a problem for the company in the far out future (stock holders want to see company growth, they expand into other sports, hockey line starts to suffer, etc, etc, etc...)

Prospectus is available here:

SEDAR

You shouldn't decide if you would "take a position" in the company until you know the final price...the issue hasn't yet been priced.

-80% of IPOs are under water one year after issue.

-This company made about $16 million dollars in the past year

-This company lost $19.4 million dollars the previous year (fiscal '09, but would have included a large portion of calendar '08 / ie financial crisis)

- They lead in every single product category except sticks (where they are 2nd)...where can the growth come from?

- They seem to point to there being growth opportunities in Lacrosse...maybe

Read the prospectus....

If early indications of pricing turn out to be the case, they are selling 20% of the company for $75 million...thus valuing the entire company at around $375 million. If we take this last year as good indicator of earnings power (ie earnings are ongoing and regular and not cyclical which is more realistic), you get an earnings yield of just over 4%.

That is not exciting...so to invest in this company at this price, you must believe that they have, at a minimum, a 4 or 5% annual rate of growth. This has not been the case (more like 1%-2%, so if you are a buyer, you have to have a view as to where that growth is going to come from.

Always remember...the guy selling you the shares (Kohlberg Sports Group Inc) thinks that this is a great price at which to sell shares. They are taking this money for their shares, as opposed to keeping the money in the corporation to fund growth.

Good luck, and do your homework!

[dayroc 0]

Prospectus is available here:

SEDAR

You shouldn't decide if you would "take a position" in the company until you know the final price...the issue hasn't yet been priced.

-80% of IPOs are under water one year after issue.

-This company made about $16 million dollars in the past year

-This company lost $19.4 million dollars the previous year (fiscal '09, but would have included a large portion of calendar '08 / ie financial crisis)

- They lead in every single product category except sticks (where they are 2nd)...where can the growth come from?

- They seem to point to there being growth opportunities in Lacrosse...maybe

Read the prospectus....

If early indications of pricing turn out to be the case, they are selling 20% of the company for $75 million...thus valuing the entire company at around $375 million. If we take this last year as good indicator of earnings power (ie earnings are ongoing and regular and not cyclical which is more realistic), you get an earnings yield of just over 4%.

That is not exciting...so to invest in this company at this price, you must believe that they have, at a minimum, a 4 or 5% rate of growth. This has not been the case (more like 1%-2%, so if you are a buyer, you have to have a view as to where that growth is going to come from.

Always remember...the guy selling you the shares (Kohlberg Sports Group Inc) thinks that this is a great price at which to sell shares. They are taking this money for their shares, as opposed to keeping the money in the corporation to fund growth.

Good luck, and do your homework!

Awesome DD Jordan.

I love bauer, in fact i love sports and sport products. But the fact of the matter is "sporting equipment" (not clothing) is a tough market to be profitable. I would support bauer in purchasing their products, owning shares? not so much.

[Axxion89 32]

As Jordan stated above, there isn't much reward in investing in Bauer and if they do indeed go public, there will be a lot of changes with regards to the way Bauer does business.

[Jordan 13]

From their point of view, maybe they have some kind of divine plan on revolutionary technology which needs excessive funding to be completed. Could also mean trying to corner the market by acquisition or thru litigation, where they simply would start suing everybody who moves.

Actually, it can't mean that.

If the company needed money to fund growth or "some divine plan", the money being raised would be going to the company, meaning Bauer Inc. That is simply not the case with this IPO.

It states clearly in the prospectus that the money is NOT staying inside of Bauer...this is NOT a treasury issue. The private equity firm which owns Bauer is selling 20% of THEIR shares to the public. None of this money is going to Bauer Inc. All of the proceeds (less the investment banker's commissions) are going to the Kohlberg Sports Group Inc.

[watchgreat 4]

Iwonder if bauer will file a similar suit against graf with their infringement on t1 one95/100. (g75)

[Jordan 13]

Okay...simple terms:

20% of the company is being sold by its' owners, Kohlberg Sports Group inc. None of the money raised is going to Bauer. NONE.

All of the money is going to the private equity firm that currently owns 100% of Bauer. They are basically saying that they think that they can make more money investing in something other than Bauer.

After the IPO, they will own 80% of Bauer, and the public will own 20% of Bauer. Bottom line: Kohlberg wants to own less of Bauer, and have less of their capital in Bauer.

If they were raising money for future Bauer projects (such as aquisitions or building new plants or whatever...) they would not sell any of their shares; they would issue additional shares and keep the money inside of Bauer. Kohlberg would own a smaller percentage of the company at the end of the day, with the hopes that the projects that they undertook with the new money would make them richer.

Hope that helps.

[ZurichLions 0]

Okay...simple terms:

20% of the company is being sold by its' owners, Kohlberg Sports Group inc. None of the money raised is going to Bauer.

All of the money is going to the private equity firm that currently owns 100% of Bauer. They are basically saying that they think that they can make more money investing in something other than Bauer.

After the IPO, they will own 80% of Bauer, and the public will own 20% of Bauer. Bottom line: Kohlberg wants to own less of Bauer, and have less of their capital in Bauer.

If they were raising money for future Bauer projects (such as aquisitions or building new plants or whatever...) they would not sell any of their shares; they would issue additional shares and keep the money inside of Bauer. Kohlberg would own a smaller percentage of the company at the end of the day, with the hopes that the projects that they undertook with the new money would make them richer.

Hope that helps.

[ZurichLions 0]

I work on Wall Street as an investment banker, so this is rather fascinating. First off, Jordan explains the deal very well, he is 100 % correct with everything he says.

Let me add a few thoughts. Kohlberg has identified a project they really like, one they can not finance themselves alone and need capital. Normally, a private equity firm would go to their usual sources, such as institutional investors (i.e. pension funds, hedge funds, university endowments etc.) or high net worth individuals. However, these sources are no fools and always want a return on their investment. So Kohlberg tries something very cute, they want to find people who would in effect finance their latest project without getting a penny back!

I can not reiterate how great a deal this is for Kohlberg and how terrible it is for the purchasers of the Bauer stock. The public will be a minority owner with absolutely no say in the company. Kohlberg can still manage Bauer in they way they feel is best for THEM and not for the minority share owners. Every decision regarding Bauer would still be entirely up to Kohlberg, the direction of the company, whether they ever want to pay you a dividend or not etc. The secondary market will most likely be slim to none, good luck in trying to sell the shares if you need the cash yourself.

In conclusion, as Jordan properly stated, all you would do is giving a Private Equity Firm capital to pursue a project other than Bauer without any participation in said project.

[yesido 0]

Good explanations, Jordan and Zurich. I work on these types of deals as a lawyer, and this is just the latest example in a long Canadian history of smart money dumping marginal product on Canadian retail investors interested in owning an iconic name like Bauer.

I also took a quick run through the prospectus, and found it quite interesting that much of the market share information included in the prospectus is either based solely on "management estimates" or an unnamed survey commissioned by Bauer. There is very little actual third-party independent corroboration for much of the market information in the prospectus. In other words, a lot of the numbers could say whatever they wanted them to say (although many of the numbers are admittedly consistent what people on this board seem to believe). In a deal filed with the SEC they probably wouldn't be allowed to rely entirely on "management estimates", but this is a Canadian deal so the rules are different. But investors beware.

[Jordan 13]

Final Thought:

Always remember that there is a big difference between a good company, and a good stock.

Okay one more final thought:

The price you pay, determines your return!

[Chadd 916]

Final Thought:

Always remember that there is a big difference between a good company, and a good stock.

Exactly. Bauer is number one in pretty much every segment of the market, how do they grow or improve? You're talking about a company that has pretty much reached the saturation point in a fairly small industry. That said, I really wish good companies weren't punished on the market for being stable and successful. Way too many companies have ended up with long term problems due to short term concerns over things like stock prices.

[DarkStar50 680]

Kohlberg and Bauer are practically two separate entities in this sense: Bauer and the people at Bauer are in the business of hockey. Kohlberg is in the business of business.

[Chadd 916]

Kohlberg and Bauer are practically two separate entities in this sense: Bauer and the people at Bauer are in the business of hockey. Kohlberg is in the business of business.

Correct, but even with a 30% divestiture, Kohlberg will still be the majority owner.

[DarkStar50 680]

Oh, of course, it's just that they treat Bauer like any other brand they have invested in, a means to an end: more $$. Meanwhile, we see Bauer or RBK/CCM as some vested vintage brand when that is really not at all the way things are in the world of big money. The ability and need to disconnect is very difficult.

[AIREAYE 248]

Do/did any other companies use the same strategy to gain capital?

[Chadd 916]

I don't recall anyone trying to spin off a hockey brand into a publicly traded company in the last couple decades.

Oh, of course, it's just that they treat Bauer like any other brand they have invested in, a means to an end: more $$. Meanwhile, we see Bauer or RBK/CCM as some vested vintage brand when that is really not at all the way things are in the world of big money. The ability and need to disconnect is very difficult.

Exactly, they have $200M invested in the Bauer brand and now they want to start getting some of that back. That money will earn a much better return in other areas now that the world economy has stabilized and started improving.

[HockeySavants 5]

Bauer is growing, they are looking at Lacrosse, working on fitness again, and apparently the Professional Bull Riders love their helmets, there is so much room for expansion.

[JR Boucicaut 3810]

But he's a savant!

[Jordan 13]

That said, I really wish good companies weren't punished on the market for being stable and successful. Way too many companies have ended up with long term problems due to short term concerns over things like stock prices.

I get your point. That being said, good companies that are big, and stable get rewarded when they pay a dividend, and that dividend grows at a reasonable rate. Many blue chip companies do this, and their stocks do very well over the long term.

Kohlberg, will maintain complete control over the company, has no intention of paying a dividend, and is selling the public stock at quite a high price...all of that makes this a poor investment.

As for the guy claiming that "there is so much room for growth"...umm, no. For that to be the case, the overall hockey market would have to be booming, as their is virtually no room to increase market share. As for lacrosse, pfffft, a small base that is growing, but such a small part of their product mix, that it basically has no impact.

I guees that you can keep holding onto better penetration in Rodeo? Did you really say that?!

Anyhow, I was probably too muted in my earlier posts.. so here is the bottom line, this is a crappy deal.

If it was truly good deal for investors...they could have easily done a small deal like this with a handful of institutional investors. It would have been done with a few phone calls.

[bostonjuniorblackhawks 1]

But he's a savant!

I've been waiting for someone to say something along the lines of that

[Jordan 13]

As far as pricing the issue; they phone clients and do presentations prior to final pricing. They get indications of interest from potential buyers (large ones) prior to pricing.

From this information, they have a pretty clear idea if the issue is going to sell and at what price. If they don't have enough indications of interest, they may lower the price and try again, or they may pull the deal.

[ZurichLions 0]

It is really important for everyone to keep in mind that you must not let emotions be part of your investment decisions. Liking a product does not make it a good investment!

Several people have talked about the growth prospects of Bauer. Let's keep in mind that this IPO is NOT to raise capital and fund growth, but Kohlberg's desire to divest themselves of 20 % of the company. I am not an industry expert and don't know what the growth prospects are, however, Kohlberg's decision tells me all I need to know. The smart folks at Kohlberg who run the company on a daily basis know best what the growth prospects are and they obviously don't think very highly of them. Otherwise, they would hold on or even raise new capital rather than trying to sell part of the company.

[shooter27 117]

I work on Wall Street as an investment banker, so this is rather fascinating. First off, Jordan explains the deal very well, he is 100 % correct with everything he says.

Let me add a few thoughts. Kohlberg has identified a project they really like, one they can not finance themselves alone and need capital. Normally, a private equity firm would go to their usual sources, such as institutional investors (i.e. pension funds, hedge funds, university endowments etc.) or high net worth individuals. However, these sources are no fools and always want a return on their investment. So Kohlberg tries something very cute, they want to find people who would in effect finance their latest project without getting a penny back!

I can not reiterate how great a deal this is for Kohlberg and how terrible it is for the purchasers of the Bauer stock. The public will be a minority owner with absolutely no say in the company. Kohlberg can still manage Bauer in they way they feel is best for THEM and not for the minority share owners. Every decision regarding Bauer would still be entirely up to Kohlberg, the direction of the company, whether they ever want to pay you a dividend or not etc. The secondary market will most likely be slim to none, good luck in trying to sell the shares if you need the cash yourself.

In conclusion, as Jordan properly stated, all you would do is giving a Private Equity Firm capital to pursue a project other than Bauer without any participation in said project.

I also worked on Wall Street in IB - the one thing not to forget is that IPOs are generally slightly underpriced by the bookrunner to create a first day "pop" and keep the IB's client's happy. Remember, both the IPO company, and the institutional investors who buy the IPO are the IB's clients (IPO company is the client of the capital markets group and the investors are clients of the institutional brokerage group). So if you have a brokerage account at one of the IB's involved in the syndicate and can get in on the deal at the actual IPO price you are likely going to get a decent return on the first day "pop". However, once it pops, you should sell the shares - as someone has already said IPO's generally do not perform well in the first year after pricing. The reason for that is simple - think of it from the perspective of the owner, are you going to sell stock when its got a high value or a low value?

[JR Boucicaut 3810]