Jun 18, 2017 Omaha.com
A federal regulator soon may decide how to preserve competition among outdoors retailers if Bass Pro Shops and Cabela’s combine into a single company.
That might mean Bass, which is set to swallow up Nebraska-based Cabela’s, could be forced to sell some locations to other competitors.
The Federal Trade Commission has to give the deal its blessing; the agency has until the end of the month to complete its latest review of the proposed tie-up. It’s likely the last big roadblock to the sale.
The FTC is looking at whether the Bass-Cabela’s tie-up could be bad for consumers who buy fishing rods, guns and camping gear — especially in markets where the two companies compete head-to-head.
Cabela’s and Bass Pro have stores in a handful of markets that compete head-to-head — including in the Omaha area, where Cabela’s has a store in La Vista and Bass Pro has a store in Council Bluffs.
In some markets, though not Omaha, that could mean shoppers wouldn’t have anywhere else besides Bass Pro to buy outdoors gear — a reason the FTC likely is taking its time to examine the deal, analysts say.
Documents filed with the U.S. Securities and Exchange Commission last month indicate the wait for news from the FTC could be over soon. The two companies complied with the agency’s second request for information about the sale as of April 14, the documents say, and the parties agreed on a 75-day review period. Seventy-five days from April 14 is June 28.
Still, the news at the end of this month could be that the FTC needs more time. Antitrust lawyers say that a settlement could be underway between the companies and the agency to divest some stores in markets where there might be competition issues.
A spokeswoman for the FTC declined to comment on the investigation. Cabela’s and Bass Pro also declined to comment.
If the FTC identifies markets where there would be a lack of competition if the companies combined, the agency wouldn’t want the companies to just close a store in those markets, said George Alan Hay, a professor at Cornell Law School who formerly served as director of economic policy for the antitrust division of the Justice Department. Instead, the FTC would want the companies to sell a store to a company that would operate it as an outdoors retailer, to maintain competition.
“They’re negotiating, I’m sure, the extent of any divestitures that Cabela’s and Bass Pro will have to make,” Hay said.
The number of retailers directly competing with Bass Pro and Cabela’s is dwindling. Gander Mountain, a retailer of outdoors goods, would have been a natural buyer for many of the stores, but it declared bankruptcy in March. Some of the stores were purchased out of bankruptcy by Camping World.
Dick’s Sporting Goods also said last month that it planned to pull back on its expansion plans, as sales have been slumping.
“So what’s taking so long? Maybe they’re getting asked to divest a store or two,” said John Maysles, an analyst with Elevation Securities who has been following the deal. “If that’s the case, who’s out there to buy that store? That’s kind of the big question now that no one can answer.”
Scheels is a close competitor, said Thomas Horton, a professor with the University of South Dakota School of Law, but it’s not quite the same when it comes to product mix, and it’s not in the same locations in many cases, he said.
“It does seem as though you’re allowing the two nearest competitors to merge,” Horton said of a Bass-Cabela’s tie-up.
The companies are probably making the argument that they compete with many other retailers, including Walmart, Amazon and the countless mom-and-pop shops that sell hunting, fishing and camping gear, Horton said.
Ultimately, he said, he doesn’t expect the FTC will block the deal, especially when Bass Pro and Cabela’s have seemed to cooperate with the investigation thus far.
“I suspect there’s a good chance that this deal is gonna go through,” Horton said.
Everything else is already lined up for a sale: A special meeting for Cabela’s shareholders is on the calendar. World’s Foremost Bank, which operates Cabela’s credit card operation, is on the way to being sold. And the Oct. 3 closing deadline for Bass Pro Shops’ acquisition of the Nebraska-based outdoors retailer is quickly approaching.
Cabela’s shareholders is on the calendar. World’s Foremost Bank, which operates Cabela’s credit card operation, is on the way to being sold. And the Oct. 3 closing deadline for Bass Pro Shops’ acquisition of the Nebraska-based outdoors retailer is quickly approaching.
The FTC, which is tasked with maintaining competition within industries, filed a second request for information about the deal in December — the first clue that it might find a problem with the deal. It had filed its first request immediately after the announced deal.
If the companies and the FTC reach a settlement, that will be announced. If they don’t, these things could happen, Hay said:
» The FTC could file a lawsuit to block the merger.
» Cabela’s and Bass Pro could call off the merger — although the companies would owe hefty breakup fees to each other if they did before the Oct. 3 deadline.
» The FTC could extend the review period to continue negotiating a settlement.
“The 75 days is something which would have been negotiated between the parties, so the expectation is at the end you’ll get a decision,” Hay said. “But the decision might be ‘We’ve extended the deadline.’ ”
If a settlement is reached, investors might breathe a sigh of relief, as it’s the biggest regulatory hurdle the deal must clear before it can close.
The deal already has had hiccups. Bass Pro announced it would buy Cabela’s for $5.5 billion, or $65.50 per share, last October, and that Capital One would buy Cabela’s World’s Foremost Bank.
Not long after, Capital One said it was unlikely to get approval from the Office of the Comptroller of the Currency before the merger deadline because of an unrelated issue. Cabela’s then said it would explore alternative structures for the deal.
In April the companies announced that Synovus Financial Corp., a Georgia bank, would buy World’s Foremost and offload the credit card receivables to Capital One, serving as a sort of middleman for the deal. Under the restructured deal, Bass Pro would pay $61.50 per share.
Bass has said it would run the combined companies from its headquarters in Springfield, Missouri; that would likely mean big job cuts in Cabela’s hometown of Sidney, Nebraska.
Cabela’s will host a special meeting for shareholders to vote on the deal in Sidney on July 11.
Whatever the FTC decides, it’s likely that in markets with both a Bass Pro and a Cabela’s, one will close if the deal is approved, Horton said.
“In those areas where you have two of them, what’s the likelihood they keep them both open?” Horton said. “What’s the likelihood they’re going to keep two in Omaha?”