The Rock Fight is once again breaking news to the outdoor industry!
On Wednesday an alert listener of The Rock Fight sent us this article on PE Hub which reports outdoor brand Stio is being shopped for acquisition.
Players in the mix to take over the venerable Jackson brand being Columbia, YETI, or potentially several PE firms.
On this emergency reaction podcast, Colin and outdoor industry insider Eoin Comerford take a few minutes to offer some context and run through what they know.
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Episode Transcript:
Colin True
00:00:00.240 - 00:01:09.828
All right, everyone, before we get started today, I need to tell you about our amazing teammates at Darby Communications.
If you run an outdoor, an endurance, or an active lifestyle brand, there is no better PR or digital marketing belay partner or drinking buddy than Darby. They can help your business reach new heights. And, you know, they might just keep you from falling on your ass.
I mean, since we started working with Darby, more and more people have been reaching out to us here at the Rock Flight because of that messaging. Look, guys, if they can help us, they can help anybody. Hit them up@darbycommunications.com do it today.
Welcome to the Rock Fight, where we speak our truth, slay sacred cows, and sometimes agree to disagree. This is an outdoor podcast that aims for the head.
I'm Colin True, and today I'm joined by Rock Fight consigliere Owen Comerford for a special reaction episode to talk about emerging news that Jackson Hole's steel is up for sale. This is a special episode. We're gonna skip the normal intro and programming reminders since we're recording on an off day.
And thanks for coming into the office today. Oh, and I know it's late your time. Let's keep you late.
Eoin Comerford
00:01:09.884 - 00:01:12.960
You know, that's okay. I'm expecting overtime pay for this.
Colin True
00:01:13.340 - 00:01:17.640
We have to do that someday. Are we always gonna go hourly? I think this is gonna be a salary job eventually.
Eoin Comerford
00:01:18.140 - 00:01:24.320
You think something. Something would be nice. A free pair of shoes? I'll take anything at this point.
Colin True
00:01:24.970 - 00:01:28.594
We could probably make that happen. It's the outdoor industry. You want some Nordisk?
Eoin Comerford
00:01:28.642 - 00:01:32.098
Yeah, actually, I'd love some Nordisk. Oh, my God.
Colin True
00:01:32.114 - 00:02:10.770
We should make that happen. All right, so earlier today, one of our loyal listeners reached out and directed us to a story on pehub.com an article by.
By a gentleman named Michael Shoek. The story details that steel is indeed up for sale, a process that reportedly started in early February.
We have not been able to independently confirm that story, but based off the level of detail, it would appear this to be accurate. And per that article, all the players that we're about to name or named in that story were given the opportunity to comment.
We're going to talk about all of those in a second. We'll also have it linked in the show notes, but let's just start kind of big picture here.
Owen, are you surprised at the news that Steo is up for sale?
Eoin Comerford
00:02:11.110 - 00:03:11.108
Not really. According to this article, Steo actually hit 100 million in sales last year.
And that is kind of a milestone that a lot of companies look, to, to say, okay, these guys are big, they're the real deal. And you can typically get maybe a little bit of a bump in valuation for a company that has hit that scale.
Like, for example, when Columbia acquired Prana, it was right around that same kind of size as well. So, yeah, it does open up the doors. Also.
The other thing I would say is I took a look at the investment site called Traxxon.com, t R A X E N, kind of like Crunchbase. And some of these firms, Carp Reilly, PE firm Carp Reilly and Sandbars Capital, they've been invested since August of 2014, 14, so over 10 years.
And you know, typically for most private equity firms, they like to be in a deal for, you know, three years on the low side, maybe five, seven at the, at the high end. Right?
Colin True
00:03:11.164 - 00:03:11.860
Yeah, 10's long.
Eoin Comerford
00:03:11.900 - 00:03:29.686
Ten is long. It's long. And so they were looking for probably the opportunity to, to be able to, to get out.
And they figured, you know, hey, now, now's as good a time as any. Let's, let's see what we can, see what we can do. You know, we. Deals are happening. Let's make sure that we're in play.
Colin True
00:03:29.838 - 00:03:32.374
Did you find out how much that's been raised over the time?
Eoin Comerford
00:03:32.462 - 00:04:21.214
Yeah, well, again, according to this site, and I would say some of these sites are not always totally accurate, but according to this site, it's $42.6 million, which that's a chunk of change for a company of this size doing 100 million. And the most recent was 20 million from Lago Innovation back in May of 23, so 18ish months ago, I guess more than that, but almost two years ago.
And that was characterized as a debt equity raise, which is interesting. So it's hard to tell. Trying to read between the lines there. I think there was definitely part of it was a term loan, part of it was equity.
So there's going to be probably some debt on the balance sheet as well.
Colin True
00:04:21.382 - 00:04:29.006
So one thing I thought that was interesting about this, and one reason we wanted to get together and chat about it, is, you know, this is kind of an interesting time in the world.
Eoin Comerford
00:04:29.158 - 00:04:35.790
Is it? Yeah, I've heard it's unprecedented, Colin, I've heard that.
Colin True
00:04:35.830 - 00:04:52.898
I think we probably said those words on this podcast.
We're two days out for recording Monday's episode where I'm sure we're going to be talking about some of the macroeconomic forces that are going to come into play in this conversation. But so with that all in mind, Is, is now a good time to be trying to sell an outdoor company?
Eoin Comerford
00:04:53.034 - 00:04:58.050
Well, I mean, I think the question is when has it ever been a good time to sell an outdoor company?
Colin True
00:04:58.170 - 00:05:00.242
Like, 1999 was pretty good.
Eoin Comerford
00:05:00.266 - 00:06:29.420
1999 was pretty good. That was pretty good. You know, Moose jaw sold in 2007. That was pretty good.
Since then, I don't know, I went through a couple of sale processes myself back in Moose Jaw, and yeah, it was bumpy.
But what I would say is, if this reporting is correct, the sale process started in early February, which means that JP Morgan is the investment banker that they have. It means they've been planning this for months. JP Morgan has probably been involved for at least a few months before that.
And then there was a whole banker selection process even before that. So we're talking at least November, I would say. This started and post election things were looking good.
The M and A people were kind of getting lathered up over a Trump administration. When this thing went live in early February, we were actually at record stock market S and P, yada yada. Right.
I mean, things were looking like, whoa, we're off to the races here. Obviously things have changed just a tad last couple months. Yeah.
And even like we talked about on our pod here a couple of weeks ago, early part of this year, I think people were relatively bullish on the industry. So, yeah, I think things have just soured a little bit. But you never know. These kinds of acquisitions hopefully are with more of a long term eye.
Colin True
00:06:30.720 - 00:07:14.786
Well, one interesting thing that was in the article on PE Hub.
They mentioned some of the suitors that are listed and some of the initial targets were a handful of strategic suitors, including Yeti holdings and Columbia Sports. YETI just can't. Can we go a week without talking about YETI on the podcast? Right.
Over the past few weeks, apparently the seller has opened up to other private equity suitors. So let's just start with sort of the, the outdoor names here. Like what? Okay. Why would YETI and also Colombia have interest in steel?
I did look it up before we hopped on. I think Columbia's last acquisition was Prana, which has been 2014. So it's been a minute since they've bought anybody.
At least that's, that's the last one I could, I found. I, I don't think there's been anything since. Yeah. So, but why would YETI and Colombia be interested in owning Steo?
Eoin Comerford
00:07:14.978 - 00:08:39.262
Well, I think I'm going to flip it around a little bit and say is why would JP Morgan think that YETI and Columbia would be interested in steel? Well, no, because here's the thing.
First of all, generally speaking, you are always going to get a better price from a strategic than you are from pe. PE just looks at the numbers. They just look at the financials. That's all they really care about. Whereas a strategic is exactly that.
They are strategic. So there are synergies where they can, you know, bring like let's say a Colombia, for example, were to buy steel.
Imagine the synergies there in terms of development resources, in terms of, you know, real estate and all of the back office stuff that it takes to run, you know, a big apparel company. So yeah, there would be all kinds of synergies there. Right. So that's the first part that I would say is that's why they want to go with strategics.
And then you. The part of the issue with a deal of this is that it's going to be quite sizable.
I'm sure they're looking for more than 100 million is probably what they're looking for as a price tag here. And so that kind of limits the field. Who has the wherewithal to do those deals within the outdoor industry? It's a pretty small group.
I mean, you look historically you've got a VF Corp, right. Obviously been very inquisitive.
Colin True
00:08:39.326 - 00:08:41.998
Just about to say those guys are on the injured reserve.
Eoin Comerford
00:08:42.094 - 00:09:39.556
Right, Exactly. They could have made sense except that they're working to get their debt down so that they're not a good option.
Colombia, though, has zero debt, over a half a billion in cash on the balance sheet at the end of last year. So makes a lot of sense on the face of it. But as you said, it's been over 10 years since they made an acquisition.
Those acquisitions haven't all gone terribly well. Some of them have had good good times and bad times. There was, there were some great times at Sorrel. Things are tougher there now.
I think early days on Prana were good, you know, for a long time. Obviously Mountain Hardware had a tough time. It's starting to come out of that.
But with all that, I just don't think that Columbia is super excited to take on another acquisition right now. The feeling I get from them is that they really want to focus on the Columbia brand and building that and not be distracted by another acquisition.
Colin True
00:09:39.708 - 00:09:54.708
We, we. Dave, producer Dave floated me a few stats before we hit record on Sorrel. And again, this is, you know, Google results.
So like maybe there's some inaccuracies here. Inaccuracies here. I think it was around 2008. I think Columbia acquired them. Do you remember, do you remember for how much?
Eoin Comerford
00:09:54.764 - 00:09:55.680
Oh, I do.
Colin True
00:09:56.140 - 00:09:56.884
Eight million.
Eoin Comerford
00:09:56.972 - 00:09:57.640
Whoa.
Colin True
00:09:57.980 - 00:10:00.708
You know what they were last year? 300 million.
Eoin Comerford
00:10:00.764 - 00:10:02.960
There you go. Well, that one worked out.
Colin True
00:10:03.260 - 00:10:15.408
That one worked out okay. Yeah, yeah, yeah. Again, take that with a grain of salt.
There might be, that was, that was a, we're just kind of doing some, some picking around on Columbia. But, but still, even if it's close to that. Not bad. Not bad Columbia.
Eoin Comerford
00:10:15.504 - 00:10:19.664
Yeah, but they're not going to, they're not going to buy a Steel for 8 million, I'll tell you that much.
Colin True
00:10:19.752 - 00:10:44.266
No. And. Well, and it's also for then. I mean, if they're worth 100, you know, like you said, they're going to send more to that. More than that.
And they're the core Columbia line and the Mountain harbor line.
Just, you know, my, if I've ever had a criticism on steel, it's kind of like it's, they are the classic example of like, cover up the label and tell me which brand you're looking at. No offense to you, just it's very much. It's an outdoor brand. And so, you know, how do you stand apart in that portfolio?
Eoin Comerford
00:10:44.378 - 00:11:03.758
Exactly. Yeah. I mean, they've built out a really nice niche for themselves, but it isn't incredibly differentiated product, if we're being honest.
It's good, it's quality product. It's developed in Jackson Hole. Colin, I don't know if you know that mountain lifestyle well, or is it the.
Colin True
00:11:03.814 - 00:11:20.510
We learned, hey, let's, let's leave Mountain Hardware alone and look what happens. Because they have a resurgence and they're like, well, let's add a steo. They're doing pretty well. Like, we could probably help them out.
We could maybe get some of their costs down, add some infrastructure and let them just do their thing. I, I, you know, that would. You're making a face. I just. You're not buying it.
Eoin Comerford
00:11:20.550 - 00:11:44.578
I'm not buying it because I just don't think that that steel is different enough from what they have. Right, right.
Because the whole, the thesis behind Mountain Hardware when they, when they bought them was, hey, Mountain Hardware is like, is a premium version of Columbia to a degree.
We can actually, you know, take all of the Columbia bespoke fabrics, you know, slap them, you know, put, put a Mountain harbor logo on it and, you know, and charge.
Colin True
00:11:44.674 - 00:11:47.106
Elevate the Columbia brand. Yeah, right.
Eoin Comerford
00:11:47.178 - 00:11:54.434
And it just didn't work. So. No. Yeah. So anyway, I don't think that Colombia is the answer. And then Yeti.
Colin True
00:11:54.482 - 00:11:56.818
All right, yeah. Let's get to Yeti.
Eoin Comerford
00:11:56.994 - 00:11:58.002
Yeti Is this it?
Colin True
00:11:58.026 - 00:11:59.570
Is this apparel time for yeti?
Eoin Comerford
00:11:59.650 - 00:12:59.940
Well, Yeti also has the cash, so they have, you know, over 350 million as of last year. So could do something. They have been acquisitive. They just bought Mystery Ranch. Obviously they don't really have much of an apparel business.
It's there, but if I. It's mainly logo. Yeah, exactly. It's hats, it's hoodies, it's stuff, you know, I mean it's, it's. I'm sure it's very nice stuff. It's Yeti after all.
But it's nothing super exciting. And steo is a. Is a premium brand from a price perspective. It's. I would say it's not like premium premium, but it's up there.
It's got a good reputation, I think, for quality. So could be a fit. I don't know. I feel like if Yeti were to get into apparel, they'd want to be like arc'teryx, that kind of level. Right.
And so I don't know that Steo is Yeti enough for yeti, if you follow me.
Colin True
00:13:00.650 - 00:13:21.746
What would they do, do you think? Let's just speculate for a minute. I mean, we saw what they did with what they're planning to do with Mystery Ranch.
The sort of long, drawn out walk to the gallows that Mystery Ranch is currently walking. Do you think they would do something similar? I mean, do you think they'd be like, well, thank you for the infrastructure.
We're going to pop a Yeti logo on that now. Thanks for your service. Dio, what do you think they would do?
Eoin Comerford
00:13:21.898 - 00:13:33.580
Hard to say, but I mean, obviously we've seen the process with Mountain Hardware, but that was, I think, I think that the Mountain hardware deal was.
Colin True
00:13:34.440 - 00:13:35.456
Mr. Ray, sorry.
Eoin Comerford
00:13:35.488 - 00:13:38.240
Thank you. Mountain Hardware again, getting all confused here.
Colin True
00:13:38.280 - 00:13:41.380
Yet he bought Mountain Hardware. We're breaking news on this too. Yeah.
Eoin Comerford
00:13:41.720 - 00:13:57.042
All these m. These m Outdoor companies. Seriously, I can't, I can't even tell you. Like Mountain harbor marmot. That's all. Yeah. Anywho, for.
Yeah, the Mystery Ranch acquisition I think was 30 something. 30 some million dollars was the price.
Colin True
00:13:57.066 - 00:13:58.818
Tag there in that range. Yeah.
Eoin Comerford
00:13:58.994 - 00:14:39.210
So it's one thing to spend $37 million and kind of, you know, make it almost an AC hire where you're. You're bringing in all of this capability to then blow that up into a whatever $500 million yeti pack business.
I think It's a whole other animal to potentially spend over $100 million on a, on a clothing brand? Yeah, I don't know.
I think Yeti, if Yeti wanted to get into clothing, I think A, there's probably different or better brand alignments, and B, I don't know that they would want to stretch this far. They would want to go after somebody that's got a little bit of a different angle, I think.
Colin True
00:14:39.510 - 00:15:08.970
Well, and then, so like you mentioned, maybe because of the market uncertainty of the last couple of months, it sounds like, you know, they've moved on now to also include some PE suiters. Right.
So is that a sign that maybe, you know, the Columbia, the YETI type conversations not going the way they wanted to plan, but they're still interested in getting something done? Is that more just based off of the long and the tooth sort of PE investment that they're. They're ready to move on from?
Like, what do you, what do you take away from the PE suiters? Part of the story?
Eoin Comerford
00:15:09.590 - 00:17:07.402
I mean, I think if they had got early interest from YETI or Colombia, it would have stopped there. I mean, it's typical in these processes you go through before you go out to the market, so to speak.
You go through an analysis of all the potential targets and you really narrow it down. You say, hey, you know, we don't want.
I mean, I mean, quite frankly, I'm sure Steo probably didn't want this news getting out during, in the middle of a process, but to minimize the chances of that, you keep it pretty low and you say, hey, listen, let's just reach out to a few people, see if we can get a, get a deal done with them before we go out to the wider market. So chances are, yeah, maybe there hasn't been a fit there.
And you know, and as I said, I think that the challenge is that there aren't a ton of people in this space that are, that have the cash and the wherewithal and the interest to do a deal this size.
You know, I mean, you think about, you know, some of the, the deals that have been done recently, you might look at like, like Claris, right, that owns Black Diamond. Could make sense, right? They're into sort of the big brands like that, but obviously things have been up and down there with their portfolio.
And again, I think they're like, well, let's right the ship over here with Black diamond before we take anything else on, not to mention wherever they are from a cash or debt perspective, then you look at Compass Diversified holdings, that owns 511 Tactical and a bunch of other brands a little bit in our space here. Again, you know, things are a little bit tougher right now.
Their cash levels are under $100 million, which is really more what you need for operational purposes, you know, not really for. For acquisition. So, yeah, I just. I just think that there's limited number.
There's a limited number of strategics, and once you kind of check down that list, it's like, okay, let's. Let's talk to the private equity folks.
Colin True
00:17:07.546 - 00:17:28.770
Well, we've also reached out to Steel's leadership and pr, just let folks, let them know that we're going to be putting this episode out and invited them to come on the podcast. And I guess as we sit here, just with the information, you have any predictions to make? Anything you could. Any way you could see how this shakes out?
Do you. Do you think something happens or maybe this is just.
Yeah, they went through the process and now they're back to just doing what they're doing before.
Eoin Comerford
00:17:29.390 - 00:18:25.100
I think a lot depends upon, you know, how much they really want to sell, you know, because in some cases, it's just, hey, let's. Let's test the waters. Let's see what the market is. And we have a certain price that we want to get, and if we don't get it, so be it.
We'll kind of pull it off the mark and go. And I've been through that myself. It's a little painful, but it definitely happens.
And then there are other scenarios where you've got some private equity investors that are like, no, that fund has been closed for five years now. We need to close this whole thing down and return money to our LPs.
We need to get this thing done, like, this year, even if it's less than what we would otherwise want. So I think a lot will depend upon that as to the urgency of the sale process will drive whether a deal gets done.
Colin True
00:18:25.220 - 00:18:40.012
Well, we'll be keeping an eye on it. I think the. Did we say at the top that we're breaking because we're breaking news of the outdoor industry? This is.
Pehub.com is not an outdoor industry outlet. So we didn't claim our birthright here of, like, we're breaking news.
Eoin Comerford
00:18:40.116 - 00:18:46.664
We are breaking news. I do. Yeah. I mean, yeah, we're not the originals. I mean, but yeah, no, I think.
Colin True
00:18:46.752 - 00:18:47.900
This looks pretty legit.
Eoin Comerford
00:18:48.640 - 00:18:51.864
I think we're breaking news in the outdoor industry.
Colin True
00:18:52.032 - 00:19:16.820
There we go. Okay, I will take that. All right. That's all we care about around here anyway, so. All right. Well, that's it. That's a quick emergency episode on this.
Thanks to Owen for coming in. Make sure that you come back tomorrow. Shantae Salibar is gonna be back on the pod with producer Dave.
We're gonna review some new outdoor brand videos, then come back on Monday to hear Owen, producer Dave and I. What are we talking about on Monday? We're talking about something awesome on Monday. I promise you it's going to be great. You got to come back for it.
Eoin Comerford
00:19:16.860 - 00:19:22.148
Well, we're going to. It's going to be another happy times episode where we're going to talk.
Colin True
00:19:22.204 - 00:19:23.780
There's so much happiness in the world.
Eoin Comerford
00:19:23.900 - 00:19:33.400
We're going to talk about. I think it is the whole issue with European people boycotting US Outdoor brands.
Colin True
00:19:33.740 - 00:19:51.520
You know, if you want to understand maybe how we pick our topics, just go check out Owen's LinkedIn page and see his post about US versus European brands and what's gonna happen. And there was some spicy conversations over three or four years. That's gonna be one you're gonna like six months from now.
You're gonna be like so and so commented on this thread because it's just gonna keep going.
Eoin Comerford
00:19:51.560 - 00:19:59.136
Well, I'm gonna have to delete that thread before I leave the country, you know, so that I don't get stopped by the border.
Colin True
00:19:59.248 - 00:20:00.128
Oh, you're the guy.
Eoin Comerford
00:20:00.224 - 00:20:01.020
I am.
Colin True
00:20:01.480 - 00:20:03.540
You put that post up on LinkedIn.
Eoin Comerford
00:20:03.960 - 00:20:06.682
Banana. All right.
Colin True
00:20:06.706 - 00:20:20.350
The Rock Fight's a production of Rock Fight llc. For Owen Comerford. I'm Colin True. Thanks for listening. And he's here to take us out. He's always ready for us.
Even for special reaction episodes, it's Chris D'makes. He's gonna sing the Rock Fight Fight song. We'll see you next time, Rock fighters.
Chris DeMakes
00:20:30.780 - 00:21:20.310
We speak our truth, slay sacred cows and sometimes agree to disagree.
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