Cabela's drops share price to smooth merger with Bass Pro Shops

Dive Brief:

Cabela’s Inc. on Monday announced it has entered into agreements with subsidiaries of Synovus Financial Corp. and Capital One Financial Corp. to sell assets and liabilities of its wholly owned bank subsidiary, World’s Foremost Bank, which helps smooth the approval of its merger with rival Bass Pro Shops, according to a company press release.
Under the terms of the agreements, Synovus Bank will acquire certain assets and assume certain liabilities of Cabela’s bank, including deposits of about $1.2 billion. Synovus will retain the Bank's deposits and sell the credit card assets and related liabilities to Capital One, which will be the exclusive issuing partner of Cabela's branded CLUB Visa program. The company will continue to operate the Cabela’s CLUB servicing center in Lincoln, NE.
The outdoor retail rivals also amended their merger agreement, lowering the price tag to smooth approval: Bass Pro Shops will now acquire Cabela’s for $61.50 per share in cash (down from the previously announced price of $65.50), an aggregate transaction value of $5 billion. Cabela’s board of directors unanimously approved the change; now it's up to the shareholders (and the Federal Trade Commission).

Dive Insight:

Capital One’s struggle to obtain regulatory approval for Cabaela’s in-house credit-card issuer had thrown the whole merger plan into doubt earlier this year, but the deal with Synovus, which first emerged last month, could salvage it.

“We’re excited to announce this agreement, which allows us to look ahead with greater certainty toward the completion of our merger with Bass Pro Shops and offers a positive step forward for all parties,” Cabela’s CEO Tommy Millner said in a statement. “We look forward to completing these transactions for the benefit of our shareholders, Outfitters and outdoor enthusiasts.”

But it’s not a done deal: In December, Cabela's and Bass Pro Shops each received a request for additional information and documents (commonly known as a “second request”) from the FTC in connection with their proposed merger, according to a filing with the Securities and Exchange Commission, launching a more involved process that could continue to delay proceedings for several months.

Cabela's and Bass Pro Shops have a lot in common. Both were founded in roughly the same era and in 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 last 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 bases: Bass Pro noted that 45% of its customers also frequent Cabela’s. The similarities and overlap make a merger both rational and a target of careful scrutiny from regulators, according to Scott Wagner, an antitrust expert and partner in law firm Bilzin Sumberg’s litigation group — and, clearly, close scrutiny is now ongoing. “[Bass Pro Shops and Cabela's] really are the best possible example of direct competitors," Wagner told Retail Dive last year. "And that always raises antitrust concerns, especially in a market of this size and a transaction of this size.”