Hockey gear maker CCM up for sale as private equity owner looks for an exit – The Globe and Mail

4 minutes, 19 seconds Read
Open this photo in gallery:

Customers leave Just Hockey Toronto, a hockey equipment store in the Eglinton Ave. East and Don Mills Road area, on April 15.Fred Lum/The Globe and Mail

The maker of the sticks that National Hockey League stars Auston Matthews, Connor McDavid and Sidney Crosby use to put the puck in the net is up for sale.

On the eve of the NHL playoffs, private equity fund manager Birch Hill Equity Partners has placed CCM Hockey on the auction block. CCM, one of two dominant hockey-gear companies, is expected to fetch a price that is a significant multiple to the $110-million Birch Hill paid for the business seven years ago.

Toronto-based Birch Hill recently hired U.S. investment bank Robert W. Baird & Co. Inc. to run the potential sale, according to two sources involved in the process. The Globe and Mail is not naming the sources because they are not permitted to speak for the companies.

Birch Hill decided to shop Montreal-based CCM after receiving several unsolicited offers for the gear maker from private equity funds, the sources said. They said there is no guarantee the process will result in a sale. Spokespersons for Birch Hill, CCM and Baird declined to comment.

CCM’s potential buyers include sports equipment manufacturers and large private equity funds, according to the sources. One said Birch Hill expects to conclude the process, with or without a sale, by the summer, to avoid a prolonged period of uncertainty around ownership. According to a recent press release, CCM has 500 employees.

Birch Hill acquired CCM from Adidas AG in 2017 as the German manufacturer shifted its focus back to shoes. Baird, an investment bank based in Milwaukee, Wis., advised Adidas on the sale.

At the time, CCM was losing money. In a press release to announce the transaction, Birch Hill said it bought the company because “CCM had a clear path to a better margin profile and had the potential to grow its market share.”

Over the past seven years, CCM more than doubled revenues and increased its profit margins by acquiring businesses, including a sports apparel company and skate blade manufacturer. The company now generates $75-million in annual earnings before interest, taxes, depreciation and amortization (EBITDA), according to one of the sources. Private equity-owned companies like CCM tend to sell at a multiple of their EBITDA.

CCM’s most profitable business lines are its hockey sticks and apparel, according to one source. A limited edition Auston Matthews Jetspeed stick sells for $499 – with an autograph – while a beer league player can easily spend $300 on a stick made from carbon fibre, Kevlar and other composite materials.

Private equity fund managers like Birch Hill typically acquire a company, spend up to 10 years improving operations, then sell it and return any profits to their backers, while keeping approximately 20 per cent of the gain.

In 1994, veterans of Toronto-Dominion Bank TD-T founded Birch Hill and the company now has $5-billion in capital under management. Over the past three decades, Birch Hill has invested in 71 companies and sold 57 of these businesses.

The Baird investment banker handling the CCM sale for Birch Hill is Joe Pellegrini, a former National Football League lineman who now focuses on mergers and acquisitions involving consumer product companies, one of the sources said.

CCM provides sticks, skates and helmets to roughly 40 per cent of NHL players, along with Professional Women’s Hockey League stars such as Sarah Nurse. The company’s major rival is Bauer, which also has approximately 40 per cent of NHL pros using its gear. In the past, CCM executives said the hockey equipment business is relatively mature, growing at roughly 2 per cent annually, and the key to success is winning market share from rivals.

The other major hockey stick manufacturer is Canadian Tire Corp. CTC-T -owned Sherwood Hockey, which scored last year by signing up number one draft pick Connor Bedard. Canadian Tire acquired the 66-year-old Sherwood brand in 2018.

Outside CCM, Bauer and Sherwood, the smaller players on hockey rinks include New Balance Inc. and True Temper Sports. According to data service Mordor Intelligence, hockey players around the world spent US$1.9-billion on equipment last year.

CCM’s roots go back to 1899, when the company was founded as the Canada Cycle & Motor Co. Ltd. Six years later, CCM pivoted into hockey equipment, using scrap metal from its bike and auto parts factories to make skate blades. By the 1930s, CCM dominated the market: 90 per cent of hockey players wore its skates.

In 2004, Reebok purchased CCM for US$400-million, including debt. The next year, Adidas bought Reebok.

CCM rival Bauer, founded in Kitchener, Ont., in 1927, also returned to Canadian hands after being owned by a global shoe company and a private equity fund.

In 1995, Nike Inc. acquired Bauer and the Cooper sports brand for US$395-million. In 2008, the shoe company exited hockey by selling Bauer to a group led by Canadian businessman Graeme Roustan and U.S. investment firm Kohlberg & Co. for US$200-million. The company went public in 2014.

In 2017, Peak Achievement Athletics Inc. acquired Bauer. Peak is a partnership between Montreal-based Power Corp. subsidiary Sagard Holdings Inc. and Fairfax Financial Holdings Ltd., headquartered in Toronto.

This post was originally published on 3rd party site mentioned in the title of this site

Similar Posts