Bass Pro Shops-Cabela's merger delayed by FTC antitrust concerns

Dive Brief:

The proposed $5.5 billion merger between Cabela’s and Bass Pro Shops has been delayed by a request from the Federal Trade Commission for more information, according to news reports.
The FTC’s regulatory review period was to expire this week, and Cabela’s has refiled its merger application, giving the agency until Dec. 29 to either complete its review or compel the need for a second request review (a discovery procedure for mergers and acquisitions with possible anti-competitive consequences), a more involved process that would likely delay proceedings for several months, according to the New York Post.
Meanwhile, Capital One, which is buying Cabela’s World’s Foremost Bank credit card business, indicated in papers filed with bank regulators that some employees may be terminated, though the bottom-dollar price of the business — $200 million — suggests that Capital One may have agreed to preserve more jobs in exchange for a bargain deal, observers told the Omaha World-Herald.

Dive Insight:

Rumors of a sale of struggling outdoor retailer Cabela’s had been brewing for months and months before privately held Bass Pro Shops agreed in October to acquire its rival for $65.50 per share in cash — a bid that outpaced a competing offer from private equity firm Sycamore Partners, working with credit company Synchrony Financial. Now it looks like any merger will take yet a few more months.

Cabela's and Bass Pro Shops have a lot in common. Both were founded in roughly the same era and roughly the same area of the country, with a similar number of stores sharing a destination-like shopping approach. “This speaks to one of the greater trends in the industry, in retail but in sporting goods in particular, to create a customer experience that makes it worthwhile to go to a store," IBISWorld analyst Rory Masterson told Retail Dive earlier this year. “It’s about bringing customers in to brick-and-mortar stores. It invites them to consider buying extra things that they might not have been considering going in."

There’s also considerable overlap in their customer base: Bass Pro noted that 45% of its customers also frequent Cabela’s, according to a confidential lender presentation cited by the New York Post.

The similarities and overlap make a merger both rational and a likely target of careful scrutiny from regulators, according to Scott Wagner, an antitrust expert and partner in law firm Bilzin Sumberg’s litigation group. “[Bass Pro Shops and Cabela's] really are the best possible example of direct competitors," Wagner told Retail Dive earlier this year. "And that always raises antitrust concerns, especially in a market of this size and a transaction of this size.”

At that time, Wagner also questioned whether privately held Bass Pro, which is unfamiliar with the regulatory glare that is routine for public companies, might balk at the process. “When you have private companies that have to go through this type of scrutiny, sometimes private companies balk at having to hand over detailed information that they’re not used to handing over,” Wagner said. “It looks like they’ve already been through a number of rounds [in the bidding process], but that’s something I would watch — how Bass reacts to a head-to-toe evaluation of their business practices and financials.”

The swift refiling by Cabela’s indicates a fair amount of confidence that the merger will ultimately pass muster with antitrust regulators, however. “You usually refile because you think with a few more weeks you can avoid a second request,” a source who isn’t directly involved in the merger told the New York Post. “It means you are optimistic.”