ANOKA, Minn. (BRAIN) — Vista Outdoor Inc. will acquire Fox Racing for $540 million with the potential for an additional $50 million earnout based on the lifestyle gear brand's financial performance.
Fox Racing CEO Jeffrey McGuane will continue to lead the company following the closing of the acquisition, as will all of the leadership team. Vista Outdoor expects to close the transaction in the second quarter of 2023.
Vista Outdoor's sports unit includes Bell Helmets, Giro, Blackburn, and QuietKat. Fox Racing offers protective gear, including helmets and apparel for mountain biking and motocross. The acquisition will add about $350 million in revenue to Vista's outdoor products segment.
Fox Racing has been a separate company from Fox Factory — the suspension brand — since the late 1970s. Fox Factory is now a publicly traded company that also owns RaceFace, Marzocchi and Easton cycling.
Fox Racing said it grew net sales by a compound annual growth rate of about 20% from 2019 to 2021 and is expected to grow in excess of that in 2022.
"Over the last four years, we have built a diversified portfolio of iconic outdoor brands led by a proven leadership team that continues to execute well and drive strong results for our shareholders," said Vista Outdoor CEO Chris Metz.
"With the acquisition of Fox Racing, we are continuing the successful implementation of our strategy to use accretive acquisitions to expand our leadership position and ability to capitalize on long-term growth opportunities in outdoor recreation. The Fox Racing acquisition meets all of our financial and strategic acquisition criteria, even before taking into account potential benefits from combining Fox Racing with our existing business. I am pleased that we have been able to continue to add category-leading brands like Fox Racing to our portfolio while maintaining a strong balance sheet and reinvesting in our existing business to drive organic growth."
A little over a year ago, Vista Outdoor acquired Colorado e-bike brand QuietKat.
"We're excited to join the Vista Outdoor family," McGuane said. "Together we can leverage the heritage of our leading brands, enjoy new supply chain synergies, expand our deep and established channels, and target an expanded customer base. Combined with enhanced access to capital for innovation and scale, we believe this transaction is a win-win for all involved. Vista Outdoor's leadership team has proven they have an effective, repeatable acquisition model, making Vista Outdoor the clear acquirer of choice for Fox Racing. It is not often that an acquired company can remain true to its culture and customer base, while also tapping into the benefits of Vista Outdoor's Centers of Excellence, vast retail partnerships, innovation engines, and a leadership team that enables a founder's mentality and results-driven culture. Needless to say, we are thrilled about this next chapter for Fox Racing."
For 2022, Fox Racing's full-year net sales and adjusted EBITDA are expected to be about $350 million and $55 million, respectively. Vista Outdoor expects the transaction to be immediately accretive to earnings, excluding transaction costs, transition costs, and inventory step-up.
Vista Outdoor said it expects to finance this acquisition through a combination of a $600 million asset-based revolving credit facility, which will replace Vista Outdoor's existing asset-based revolving credit facility, and a $350 million secured term loan facility. Following the closing of this transaction, Vista Outdoor's leverage ratio is expected to be below 1.5 times, within the target leverage ratio of one to two times.
