Skip to main content

Bauer hockey goalie masks are displayed for sale at an equipment store in Mississauga, Ontario. Performance Sports Group Ltd., the owner of the Bauer and Easton brands, filed for creditor protection in October.Cole Burston/Bloomberg

Potential private equity buyers appear to be steering clear of hockey and baseball equipment maker Performance Sports Group Ltd., clearing the field for a $575-million (U.S.) bid for the company from Sagard Capital Partners LP and Fairfax Financial Holdings Ltd.

Bidders have until Wednesday to submit an offer for PSG, the struggling company behind the Bauer and Easton brands, which filed for creditor protection in October. A number of private equity firms in Canada and the United States, including Bain Capital LP, as well as domestic pension funds, have taken a look at the company, according to sources familiar with the process. Bain is an investor in several Canadian consumer brands, including parka maker Canada Goose Inc. and Ski-Doo manufacturer BRP Inc.

However, sources say most of these potential private equity buyers have decided not to make a bid. If no rival offer emerges, Sagard and Fairfax stand to take control of PSG after making what is known as a stalking horse bid in October. A stalking horse proposal is when an interested buyer obtains approval for a backstop bid of a distressed company ahead of a formal auction.

Read more: On thin ice: How Bauer's owner skated into trouble

Read more: Game changer: How the goalie mask transformed the face of hockey

Potential bidders are staying on the sidelines in part because of Exeter, N.H.-based PSG's financial woes. It hasn't published audited financial statements since August, 2015, when it released results for the financial year ended May 31.

In 2016, the company revealed that it initiated an internal investigation into the finalization of its accounting statements, halting the release of further public disclosures. When PSG missed a late October deadline to submit its fiscal 2016 results, the company elected to file for bankruptcy protection in the United States and Canada.

Recent internal financial reports, which have not been publicly disclosed, show that PSG has negligible EBITDA (earnings before interest, taxes, depreciation and amortization), according to sources familiar with the matter. EBITDA is often used by private equity firms to measure success and decide how to value a business.

Neither PSG nor Bain responded to separate requests seeking comment.

One risk that's emerged more recently during the due diligence process is the uncertainty around whether U.S. President Donald Trump will eventually slap a tariff on imported goods, such as hockey skates and baseball bats, one of those people said. A sizable portion of athletic goods are made in Asia.

Decisions about whether there is a pathway to profitability at PSG need to be made this week, as bids will be accepted until 5 p.m. ET on Jan. 25. For potential bidders, the threat of over-paying looms large because there's a high bar to meet just to participate.

Sagard, a fund controlled by Montreal's Desmarais family, and partner Fairfax have put forward what one source described as an "attractive" bid for $575-million and the court has said that initial bids from other parties must start at $580-million. Rival buyers would also need to pay Sagard and Fairfax an expense reimbursement charge of $3.5-million and breakup fee of $17.25-million.

Potential owners, whether they purchase PSG as a whole or in parts, are wrestling with other issues, too: There is fierce competition in the sports equipment business and the athletic retailing industry, more broadly, has hit hard times.

Then, there are more well-known issues. Among them, PSG management's 2014 decision to acquire the baseball and softball divisions of Easton-Bell Sports Inc. for $330-million, financed with debt, only to take a $145-million writedown in 2016. While Bauer and Easton are storied and revered brands, the hockey and baseball segments are seen to be maturing in North America.

PSG's decision to open stores that sell Bauer hockey gear strained its relations with retailers on both sides of the border. There are reports that the market is filled with unsold Bauer and Easton gear, after PSG employed an aggressive sales strategy. As well, current management, led by chief executive officer Harlan Kent, are new to PSG and the sporting-goods business.

Sagard and Fairfax have made a number of other investments in sporting goods retailers and manufacturers. Through the Desmarais's broad global investments, the family is linked to a firm that has a seat on the board of Adidas AG, which owns Bauer's rival hockey equipment maker, CCM. And Fairfax owns a 75 per cent stake in Toronto-based retailer Sporting Life.

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
FFH-T
Fairfax Financial Holdings Ltd
-0.54%1460.1

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe