Outdoor financials: VF buys Reef, Minority shareholder plans to vote against Johnson Outdoors going private, plus SIA, NRF, Sears/Lands' End

Reef is acquired by VF, and becomes part of growing Outdoor coalition
VF Corp. (NYSE: VFC) has signed a definitive agreement to acquire all the outstanding stock of San Diego, Calif.-based, Reef Holdings Corp. (“Reef”) from an investor group led by majority shareholder Swander Pace Capital. Terms were not disclosed. Reef is considered a leader in the growing action sports lifestyle market and manufactures premium surf-inspired footwear and in 2004 launched an authentic surf apparel line. Reef had sales of $75 million in 2004 excluding royalties, and reports the company should experience double-digit growth in 2005. Reef is expected to contribute about $45 million to sales, be neutral to earnings per share in 2005 and accretive in 2006.

Reef will remain headquartered in San Diego and become part of VF’s expanding Outdoor coalition, headed by Eric Wiseman, vice president and chairman of VF’s Outdoor and Sportswear Coalitions. Outdoor coalition sales exceeded the $1 billion mark in 2004, and have grown nearly seven-fold over the past five years, according to VF.

The acquisition, which will be funded with existing cash balances and is expected to be completed by the end of April, is subject to normal closing conditions.

Minority shareholder plans to vote against Johnson Outdoors going private
While two proxy advisory firms — Glass Lewis and Institutional Shareholder Services — have given their blessing for Johnson Outdoors (NasdaqNM: JOUT) shareholders to vote for taking the company private, one shareholder sent a lengthy letter to the board’s special committee opposing the plan.

Up for a vote on March 22, the private-investment partnership Dolphin Limited Partnership-I said it believes the $20.10-a-share offer from the Johnson Family isn’t in the best interests of minority shareholders and will mark “nay” on its ballot. Dolphin Limited holds 200,000 of the recreational equipment maker’s 9 million shares outstanding, while about 80 percent of the company’s stock is controlled by the Johnson family.

Dolphin Limited said third-party offers were effectively shut out from consideration because the Johnson family won’t support an alternative transaction. Dolphin Limited wrote:

“JOUT Management has taken great pains to remind us that the Company has entered into a “freely negotiated transaction” that reflects the “future value of Johnson Outdoors as an independent entity.” The Proxy Statement also states that in making its recommendation, the Special Committee relied on factors including “the fact that, to date, no third party has come forward with an alternative transaction proposal.” However, the Proxy Statement also states that the Johnson Family, with its controlling interest, “did not have any interest in selling their Johnson Outdoors shares and therefore would not support an alternative transaction.” In these circumstances, how could the Special Committee or the Board reasonably have believed that a post-announcement “market-check” could lend any credence to the fairness of the transaction? It makes sense to us that there would be legitimate third party buyers for the Company.”

The letter also said the company has made “materially accretive transactions” since the offer was made in October, boosting the company’s value. Dolphin Limited said, “On an ‘apples to apples’ basis, it appears to us that this transaction represents a significant discount to the real value of the company rather than a premium.”

Dolphin Limited added that Johnson management both prepared the company’s fiscal projections while proposing to acquire the company “in a transaction whose fairness is judged on the basis of those projections.”

The Johnson family’s offer of $20.10 a share represented a 21 percent premium to the average closing price of Johnson Outdoors Class A common stock for the 30 days prior to Feb. 20, when the Johnson family made its initial proposal to acquire the entire company. Johnson Outdoors closed at $20.33, up 28 cents.

SIA corrects earlier reported sales numbers for skis and snowboards, downward
SnowSports Industries America (SIA) recently reported dollar and unit sales for specialty ski and snowboard stores as well as overall industry sales for the reporting period of August 2004 to January 2005. However, after further analysis, a calculation error was determined by Leisure Trends Group which conducts the Retail Audit.

In the release distributed earlier this month, SIA reported that overall sales for the entire wintersport market (including specialty and chain stores) were up 2.8 percent in dollars to $1.76 billion for the August 2004 through January 2005 period and unit sales were down 7.3 percent. In actuality, the report now shows that sales were flat in dollar sales at $1.7 billion and unit sales were down 10.0 percent.

It was also reported in the same release that sales at specialty ski and snowboard shops were up 2.6 percent compared to last season translating to $1.37 billion in sales while unit sales were down 2.6 percent. In actuality, specialty store totals for season-to-date sales figures now report a 2 percent decrease in dollars which translates to $1.3 billion in sales while unit sales were down 6.6 percent.

February retail sales up 4.4 percent, says NRF
The National Retail Federation (NRF) reported that retail industry sales for February (which exclude automobiles, gas stations, and restaurants) rose a solid 4.4 percent over last year and increased 0.3 percent seasonally adjusted over January. It noted that the increase was impressive, considering it was being compared with sales from last February, which were up an impressive 10.6 percent. “February’s sales were especially robust given the strong comparisons from a year ago and the persistent dreary weather last month,” said NRF Chief Economist Rosalind Wells. Also, February retail sales released by the U.S. Commerce Department show that total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) increased 0.5 percent seasonally adjusted from January and increased 5.6 percent unadjusted year-over-year.

Sears’ Lands’ End division reportedly on the block
Sears, Roebuck & Co. (NYSE: S) is reportedly seeking a buyer for its Lands’ End catalog company at an asking price below the $1.9 billion it paid in 2002, according to a recent Women’s Wear Daily article. Citing financial sources in the mergers and acquisitions community, WWD said that Sears had put a price of $1.2 billion on Lands’ End in presentations it made to a few select companies and individuals. Potential suitors listed are Texas Pacific Group, the majority stakeholder of retailer J.Crew, and David Dyer, president and CEO of Tommy Hilfiger Corp. and former president and CEO of Lands’ End, as well bankers and one financial analyst in New York who requested anonymity. One analyst estimates the division will sell for $1.35 billion, adding, “The Sears/Kmart story will work if the company follows the recipe that we witnessed at Kmart. Sell off assets that have more value outside the Company and reduce expenses and drive gross margins within. Lands’ End in our view is the biggest single asset of value, and selling it would be a good step toward our investment thesis.”

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