Easton selling divisions, Bauer Performance Sports rumored to buy baseball/softball

[PMurphy17 25]

Why do you assume the licensing agreement cannot transfer with a new ownership group?

How can you operate a brand name when the owner might refuse to renew the agreement it if you start to gain more market share than they like. Then you need a new name?? where is the brand equity?

Better question who now owns the factories where the sticks were currently being made?

[beerleaguecaptain 999]

How can you operate a brand name when the owner might refuse to renew the agreement it if you start to gain more market share than they like. Then you need a new name?? where is the brand equity?

Better question who now owns the factories where the sticks were currently being made?

A licensing agreement is a transferrable asset - depending, of course, on the terms of the contract.

[beerleaguecaptain 999]

Doubtful in this case. BPS is simply helping EBS by "licensing" the Easton name for hockey in order to sell what they already have in stock or in production.

You would know the inside of the industry better than me but I would think that Easton makes a profit and is fairly well placed in the market. Sticks and gloves do well. Skates and protective less so. I would think they are a profit making asset but then again I don't really know.

[beerleaguecaptain 999]

we shall see....

[chippa13 1844]

Not getting the Easton name with the hockey division could impact purchase price. Easton is a recognized brand and a leader in sticks. That alone is a valued asset and could have been worth a pretty penny.

[boo10 323]

I think if and when Easton hockey is sold, you're likely to see a transitional period where the Easton name is used in conjunction with the new ownership brand, (Think Nike/Bauer). For arguments sake, let's say it becomes STX/Easton. This carries on for a long enough time that consumers understand that STX and Easton hockey are the same company. Once this branding is established, STX drops the Easton name and the consumer knows that when they purchase an STX product, they're getting Easton technology.

Just my 2 cents, but this is usually how brand transitioning works.

[boo10 323]

I doubt that Bauer would allow this license to continue for one day longer than it needs.

BPS stated that details of the license agreement won't be available until the Q3 report, which is scheduled to take place after the close of the deal.

You're absolutely right, but Bauer may not have had a choice in the matter. It may have been a concession they had to make in order to get the deal done. EBS knows that the hockey division is not worth much without the Easton brand and would take steps to protect the asset value. We will likely never know for sure because the purchase agreement will not be a public document.

What I do know is that I've been through a few of these types of mergers/acquisitions (Granted not in the sporting goods business) and brand transitioning is always a high priority. Without the ability to use the existing brand and trademarks for a limited time, the asset is significantly devalued. I'm not saying I'm right, just that not being able to transfer the name rights to a purchaser would likely cost EBS tens of millions of dollars.

[chippa13 1844]

Or what I said in a lot less words.

[boo10 323]

Or what I said in a lot less words.

Haha, I missed that one! :)

[ridindirty 11]

You're absolutely right, but Bauer may not have had a choice in the matter. It may have been a concession they had to make in order to get the deal done. EBS knows that the hockey division is not worth much without the Easton brand and would take steps to protect the asset value. We will likely never know for sure because the purchase agreement will not be a public document.

What I do know is that I've been through a few of these types of mergers/acquisitions (Granted not in the sporting goods business) and brand transitioning is always a high priority. Without the ability to use the existing brand and trademarks for a limited time, the asset is significantly devalued. I'm not saying I'm right, just that not being able to transfer the name rights to a purchaser would likely cost EBS tens of millions of dollars.

Nice post. Makes sense and I was hoping someone with first hand experience would weigh in.

[JR Boucicaut 3801]

There's no way they license the Easton name to a 3rd party for hockey. There is no reason why BPS would want/need to allow a new competitor to still have nameshare.

Really don't understand why it's hard for people to see this. Easton was bought - the buyer didn't want hockey. Nothing's owed to what's left - BPS has the name, and they can do with it what they wish - you'd see an agreement to keep the name for the 2014 product, to protect dealers. After that, the product will die out, and so will the name. That's what happened with NBH.

The only way I see Easton in hockey is a house brand for Canadian Tire or something.

The tombstone on Easton Hockey's been engraved. Whether or not the product carries on under a new flag, we'll find out soon.

I think if and when Easton hockey is sold, you're likely to see a transitional period where the Easton name is used in conjunction with the new ownership brand, (Think Nike/Bauer). For arguments sake, let's say it becomes STX/Easton. This carries on for a long enough time that consumers understand that STX and Easton hockey are the same company. Once this branding is established, STX drops the Easton name and the consumer knows that when they purchase an STX product, they're getting Easton technology.

Just my 2 cents, but this is usually how brand transitioning works.

Your NBH analogy is off - Nike bought Canstar in 94 and put the name on product in 2004. When they parted ways, the agreement was to keep the NBH brand on product that was on year 1 of the product cycle. The next product cycle was Bauer-branded. It was done that way to keep the value on the product that was in mid-cycle (branding it Bauer for the 2nd year of the cycle would have devalued the NBH variant of the product, and even though the product didn't change, would have to be marked down because the perception would be that it was an obsolete product.

[ridindirty 11]

Your NBH analogy is off - Nike bought Canstar in 94 and put the name on product in 2004. When they parted ways, the agreement was to keep the NBH brand on product that was on year 1 of the product cycle. The next product cycle was Bauer-branded. It was done that way to keep the value on the product that was in mid-cycle (branding it Bauer for the 2nd year of the cycle would have devalued the NBH variant of the product, and even though the product didn't change, would have to be marked down because the perception would be that it was an obsolete product.

I think you're missing something, because all things considered, thats pretty much what hes saying would happen if, say, STX bought Easton. I assume he was trying to use a hockey example, vs something that was a perfect comparison in another market.

[JR Boucicaut 3801]

No, it wouldn't.

Nike sold Bauer to what became BPS, name included. Just like EBS sold Easton to Bauer, name included.

The licensing agreement out of that deal was to keep the Swoosh on the product that was in mid-cycle, instead of making the same product for the 2nd year of the cycle without it. The Vapor name is a Nike trademark, and BPS pays Nike to use that, as well as other Nike technologies (Flexposite is one, I think possibly VentArmor)

The difference is, Nike doesn't own another hockey company which would be a competitor.

If we go with the example that people are throwing out there, whatever company buys "Easton," they buy a hockey brand with no name. The inventory that is transferred in the deal would naturally be Easton, but ANY new product would have a new logo on it.

What did Bauer do when they bought Cascade? They kept it for lacrosse, and the hockey helmets became Bauer - because there was no reason to continue selling it as a Cascade M11. Itech? Same thing. If they weren't doing that for a brand they bought, why would they allow it for a competitor?

[ridindirty 11]

No, it wouldn't.

Nike sold Bauer to what became BPS, name included.

The licensing agreement out of that deal was to keep the Swoosh on the product that was in mid-cycle, instead of making the same product for the 2nd year of the cycle without it. The Vapor name is a Nike trademark, and BPS pays Nike to use that, as well as other Nike technologies (Flexposite is one, I think possibly VentArmor)

The difference is, Nike doesn't own another hockey company which would be a competitor.

If we go with the example that people are throwing out there, whatever company buys "Easton," they buy a hockey brand with no name. The inventory that is transferred in the deal would naturally be Easton, but ANY new product would have a new logo on it.

Unless you have information that isnt public and are dancing around it, I dont see how that can be gleaned from the press release. Boo framed his posts around the idea that there would be a brand transition going forward as part of the hockey sale as well.

[JR Boucicaut 3801]

The brand transition is that Easton Hockey dies and becomes something else. They sold the name. BPS doesn't owe the 3rd party anything - they're not making the deal.

If the 3rd party wants to license the name they would have to take that up with BPS. And it'd be idiotic for BPS to do that.

[All Flash 49]

This is a sad day for fans of Easton hockey.

[ridindirty 11]

The brand transition is that Easton Hockey dies and becomes something else. They sold the name. BPS doesn't owe the 3rd party anything - they're not making the deal.

If the 3rd party wants to license the name they would have to take that up with BPS. And it'd be idiotic for BPS to do that.

Again, I dont disagree, but I read the link in this thread and I googled other articles. As of yet I dont see anything that specifically says how the name will be transitioned going forward, except that Bauer owns the name and has agreed to some sort of licensing agreement. If I missed where it said it in the link, sorry about that.

So all that being said, I'm inclined to believe Easton hockey is worth decidedly less without the ability to transition the name in any way, shape or form... and on top of that, an opinion of someone who has been through these mergers and acquisitions a few times and states that negotiating some sort of transition for the eventual purchaser of Easton Hockey is standard operating procedure.

No offense intended JR.

[AIREAYE 248]

Love the back and forth discussions you guys are having; learning lots.

[JR Boucicaut 3801]

Damn. Beat me to it.

If it had so much value, two hockey manufacturers wouldn't have passed up buying them, like what's happened here.

[boo10 323]

The brand transition is that Easton Hockey dies and becomes something else. They sold the name. BPS doesn't owe the 3rd party anything - they're not making the deal.

If the 3rd party wants to license the name they would have to take that up with BPS. And it'd be idiotic for BPS to do that.

JR, you make many valid points and i don't claim to have any specific knowledge regarding this particular deal. I'm speaking solely from experience in other industries. My point about the NBH branding wasn't regarding the sale of Bauer, but rather Nike's use of the Bauer brand in an attempt to establish Nike as a legitimate hockey company. Nike's sale of Bauer was a different situation as Bauer was a long established brand name in hockey, so the purchaser had no need or desire to use the Nike name. Purchasing Easton hockey without the temporary use of the name will do nothing to further a smaller brand in the eyes of consumers. If the purchaser does not have a vehicle to inform consumers that their product is derived from Easton tech, then there is zero goodwill. There have been many companies with good products that can't crack the market because the consumer doesn't know who they are. Again, not saying it won't happen, just that there is less value.

BPS definitely would not want to license the Easton name to a competitor, but EBS could have made it a condition of the purchase agreement. Not saying they did, but I have seen this type of clause in purchases that I was directly involved in. On the other hand, BPS may have paid a premium for the Easton name since without it, they've effectively castrated the hockey division. I can assure you that EBS would not give up the goodwill value associated with the brand name just to sell the baseball division. Either way, I will be interested to see what the licensing deal includes.

Edit: Thinking about this a little further, EBS could use the name rights granted to them to transition the brand prior to selling the hockey division. Maybe something like Easton/Bell hockey for one product cycle. Then they turn around and sell the Bell name to whomever purchases the hockey division. That purchaser brands the product ABC/Bell hockey with the intent to transition to ABC hockey. There are many possibilities; maybe Easton hockey immediately becomes Mako (powered by Easton) or something silly like that.

[shooter27 116]

I wouldn't call negotiating the ability to transfer the license to use the Easton brand to the next buyer "standard procedure". And I can say that not just as someone who has been involved in a fair bit of M&A but also been at the negotiating table on deals. It would be pretty standard to license the brand to the seller so they could continue to sell product in another subsidiary that uses the same branding, but was not bought in the transaction. However, in general those licenses do no survive a subsequent transaction with a third party. It would actually be quite rare for the license to have an unregulated ability to be transferred to a third party. The license being transferable, subject to the approval of BPS wouldn't be unheard of, but not common, and that effectively kills the ability to transfer the license if BPS doesn't want it transferred. Most cases of a licensing agreement in a deal like this are very specific and very limiting in their use of the license and not transferable.

In general, the only reason BPS would agree to provisions allowing for the transfer of the license is if they were absolutely desperate to get their hands on the baseball division. That doesn't seem to be the case here. The buyer only gives up rights like that if they absolutely have to in order to get a deal done. Given EBS seeming desire to sell these pieces off as quickly as possible, and their inability to find a buyer for the hockey brand, I would doubt EBS (and really Fenway Partners, which owns EBS) is in a position to pound on the table and demand the license be transferable.

I'll have to send a couple emails and see if I can find out any more info I can share here.

Also, for those that were interested in the anti-trust discussion we had in this thread a few weeks back, pay attention to the Comcast-Time Warner Cable deal. There are going to be all kinds of interesting anti-trust arguments involved in that deal. From a pure HHI calculation standpoint at a national level it should never get approved, but I would think Comcast is going to argue that cable isn't one national markets but a lot of local sub-markets, which could be an interesting argument.

[DarkStar50 679]

Bauer should have bought the Phoenix Coyotes.

[boo10 323]

So this morning I pulled out the old purchase agreement that I was referring to and I'm embarassed to say that my memory was a little off, (In fairness to me, the deal was almost 10 years ago).

The situation was similar in that Company A sold Division 1 and a trademark to Company B, then licensed back the trademark for use in Division 2. Company A then sold Division 2 and the trademark license to Company C, which was in the same industry as Company B. Company C was allowed to use the trademark for 1 year. Sounds similar, right? Here's the bit I forgot..... Company B and Company C were in the same industry, but did not compete in the same market! Doh!

I will now tuck my tail between my legs and go to the box. I will sit there and I will feel shame!

[PMurphy17 25]

Bauer should have bought the Phoenix Coyotes.

Yeah because they are good a killing brands and the key person who bought Bauer from Nike is trying to build an arena in Markham(suburb of Toronto)

[iceman8310 105]

the article says though "as result of the acquisition, BPS will own the Easton brand and the Easton Baseball/Softball business while Easton-Bell Sports will retain the Easton Hockey and Easton Cycling businesses". says EBS will retain easton hockey. am I missing something in the article?

http://online.wsj.com/article/PR-CO-20140213-915781.html