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Saturday, Feb 24, 2024

Vista Outdoor Buying Fox Racing for $540M+

Irvine-based motocross and mountain bike gear and apparel retailer Fox Racing is setting its sights on a new trail for expansion, under the umbrella of Vista Outdoor Inc. (NYSE: VSTO).

Vista, an Anoka, Minn.-based outdoor and sporting products conglomerate, last week announced plans to buy Fox Racing for at least $540 million, making the local company the 40th brand to join its portfolio.

Fox Racing will be among the largest units for Vista, which was valued at around $1.6 billion as of last week; other brands it owns include Petaluma-based hydration product manufacturer CamelBak, Overland Park, Kan.-based binoculars maker Bushnell and Richmond, Ind.-based gun accessory manufacturer Champion Target.

It’s the largest acquisition to date for Vista, which announced plans in May to separate its outdoor and sporting goods businesses into two stand-alone public companies. That split should be completed next year.

The stand-alone outdoor unit, which will include Fox Racing, was responsible for about $1.3 billion of Vista’s $3 billion in 2021 revenue.

Fox Racing’s full-year net sales and adjusted earnings before interest, taxes, depreciation, and amortization in 2022 are expected to be approximately $350 million and $55 million, respectively.

Fox said it grew net sales by a compound annual growth rate of about 20% from calendar year 2019 to 2021, and it is expecting to grow in excess of that amount in calendar year 2022.

Depending on Fox’s financial performance, the deal with Vista could potentially include an additional $50 million earnout.

The deal is expected to close in a few months.

2014 Recapitalizaton

Fox Racing “is an ideal fit for our portfolio with a reputation for high-quality helmets, protective gear and apparel for motocross and mountain biking,” said Chris Metz, Vista Outdoor CEO, in a statement.

Fox’s motocross unit, which makes helmets, gloves, pants and guards, currently makes up about 44% of the company’s sales. Mountain bike products, such as helmets, shorts and jerseys, represented another 38% of its business, while the company’s apparel lines, a mix of casual, performance and utility clothes, was the remaining 18%.

Fox CEO Jeffrey McGuane will continue to run Fox without any changes to its leadership team, according to a company statement.

The company is estimated to employ about 200 people at its 82,000-square-foot headquarters near The District shopping center in Tustin. The distinctive creative office, which opened about a decade ago, counts a dirt bike course in its parking lot.

The acquisition marks the latest chapter for Fox Racing, which was previously known as Fox Head. When Santa Clara University physics professor Geoff Fox founded Fox in 1974, it began as a distribution business for European motocross parts and accessories in a 1,500-square-foot building in the Northern California city of Campbell.

The company moved its headquarters designation and other operations to Irvine in 2016, two years after Palo Alto-based private equity firm Altamont Capital Partners took a majority stake in the business, in a deal that news reports at the time estimated was around $200 million.

The Fox family kept a stake in the business after that recapitalization deal, as did a handful of pro motocross athletes, according to a 2014 statement.

Notable execs with ties to OC at Altamont include Scott Olivet, who has held exec roles at Jim Jannard’s Red Digital Cinema and Oakley, and who currently serves on the boards of Oceanside apparel company Brixton and Carlsbad’s Reef, a maker of shoes, sandals and other apparel.

Olivet served as interim CEO after Altamont took over ownership of Fox, and was executive chairman until about three years ago.

‘Strongest Brand’

Fox’s reputation as the “strongest brand” in the motocross industry and lengthy history are key drivers in the deal, Vista Outdoor officials say.

Officials also noted industry tailwinds, such as increased participation in motocross activity during the pandemic and the addition of 2,000 miles of new U.S. mountain bike trails in 2020, as testaments to the growing $3.4 billion market for mountain bike and motocross gear and apparel.

“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,” Vista’s Metz said.

Vista counts other bike helmet units in its portfolio and says Fox’s products should do well as the parent company expands its range of mountain and road biking, skiing/snowboarding and powersports product lines. ­

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