CCM hockey skates on display at Just Hockey Toronto, a hockey equipment store, on April 15.Fred Lum/The Globe and Mail
In a contest matching the intensity of anything that plays out on a rink, the private equity owners at three of North America’s largest hockey-gear makers are competing this summer to sell the businesses.
CCM Hockey, Bauer Hockey LLC and the hockey division of True Temper Sports are all being auctioned by their long-time owners, according to two sources involved in the sales process. The Globe and Mail is not naming the sources because they are not permitted to publicly comment for their employers.
Bauer and True Temper are attempting to take advantage of buyer interest generated by CCM, the first business to hit the market, according to the sources.
However, there may now be too many players on the ice, the sources said, with Bauer potentially sabotaging the planned CCM sale by luring away bidders.
In the spring, CCM owner Birch Hill Equity Partners kicked off the action by launching a sales process for the Montreal-based business, which supplies gear to National Hockey League stars such as Auston Matthews, Connor McDavid and Sidney Crosby.
CCM has been making skates and sticks for more than a century, and improved financial performance on Birch Hill’s watch drew strong interest from buyers, including large U.S. private equity funds and Canadian pension plans. Birch Hill expects to sell the company for more than $500-million, according to the sources.
In 2017, Birch Hill acquired CCM from Adidas AG for US$110-million. The hockey company was losing money at the time. Over the past seven years, CCM gained market share and raised product prices, and now has earnings before interest, taxes, depreciation and amortization (EBITDA) of $75-million annually, the sources said. The Toronto-based fund manger hired U.S. investment bank Robert W. Baird & Co. Inc. to run the sale.
This summer, news of a lineup of bidders for CCM and the healthy price they were willing to pay prompted the owners of archrival Bauer – Sagard Holdings Inc., an arm of Desmarais family controlled Power Corp. POW-T, and Fairfax Financial Holdings Ltd. FFH-T – to put the New Hampshire-based business on the block.
Sagard and Fairfax acquired Bauer out of bankruptcy in 2017 for US$575-million and are targeting a US$800-million exit, according to one of the sources. Bauer’s EBITDA is just more than US$100-million annually, the source said.
In early August, Bauer’s advisers received expressions of interest from 11 potential buyers and moved to the next stage of the sale process with eight players, including several U.S. private equity funds, according to the source, and several bidders for Bauer also looked at CCM.
Bauer set a Sept. 16 deadline to move forward with a maximum of four bidders, and plans to be in the final round of negotiations with one buyer by the end of October, the source said
Investment banks Morgan Stanley and Bank of Montreal are advising on the Bauer sale, which the bankers are calling “Project Hart” after the Hart Memorial Trophy awarded to the NHL player most important to his team. The two banks are willing to lend up to half the purchase price, or US$400-million, to a potential buyer, according to the source.
CCM and Birch Hill are negotiating with one favoured bidder, a Quebec-based business with financial backing from the Caisse de dépôt et placement du Québec and another provincial government-backed fund, the source said.
In August, private equity fund Lincolnshire Management Inc. jumped into the fray by launching the sale of the hockey division of True Temper, which sells skates, sticks and goalie pads. Lincolnshire bought the business in 2012 and built it into a hockey, golf, lacrosse and apparel producer.
Investment bank Raymond James Financial Inc. RJF-N is advising on the True Temper sale, which the financers called “Project Stanley” after the oldest trophy in North American pro sports. The True Temper division is relatively small, with US$53-million in sales and US$7-million in annual EBITDA, according to the source. Lincolnshire seeks to sell for more than US$50-million, according to the source.
Hockey is a low-growth sport, with the number of players in Canada declining, in part because of the cost of gear. However, the current owners of CCM and Bauer are highlighting the potential for U.S. growth as part of the sales pitch, and also advise potential buyers to hike equipment prices to increase revenues.
On Friday, CCM, Bauer, True Temper and spokespersons for the four private equity funds declined to comment on their plans.
Bauer is North America’s largest hockey-equipment maker, with roughly 60 per cent of the market. CCM is the other dominant player with an approximately 35-per-cent share, while True Temper is a relatively small competitor.
The rivalry between CCM and Bauer matches the enmity between the NHL’s Edmonton Oilers and Calgary Flames. By the end of September, the Canadian Hockey League – the umbrella organization for the country’s three major junior leagues – is expected to announce that Bauer won a five-year sponsorship agreement that CCM held for the past 14 years, according to one of the sources.
The CHL represents the interests of the Western Hockey League, Ontario Hockey League and Quebec Maritimes Junior Hockey League.