A New York-based hedge fund publicly pushed for Cabela’s to be sold, but in documents filed this week, the Nebraska retailer says it already had been quietly trying to sell itself months before the investor declared its big stake in 2015.
Meanwhile, Cabela’s co-founder and Chairman Jim Cabela initially opposed the proposed sale to Missouri-based Bass Pro Shops — or any buyer — without assurance that the retailer’s Sidney headquarters would stay open, according to the documents.
He didn’t get that guarantee, and a sale is expected to close later this year, with many of the company’s roughly 2,000 jobs in Sidney hanging in the balance.
The documents, which Cabela’s filed with the U.S. Securities and Exchange Commission this week, detail the yearlong process to sell the retailer.
Bass Pro announced in October that it would acquire Cabela’s for $5.5 billion, when including the retailer’s debt. It would consolidate a combined company’s headquarters in its hometown of Springfield, Missouri. Capital One Bank said it would acquire the company’s World’s Foremost Bank, which operates the Cabela’s credit card portfolio.
The deal has hit some regulatory snags along the way and has been restructured since then, but the documents filed this week provide a window into how the proposed sale unfolded, and an insight into Jim Cabela’s initial opposition to a sale that could hammer Sidney, a city of about 6,800 people roughly six hours west of Omaha.
Among the details disclosed in the documents:
» Cabela’s board and management discussed a sale of the company — or parts of it — as early as June 4, 2015. (It didn’t report having received any offers.) By then, the company said it already had received pressure from other shareholders to sell. That was months before the New York-based hedge fund, Elliott Management, declared an 11 percent stake in the outdoors supply retailer in October of that year, saying it would press for a sale.
» Jim Cabela initially didn’t support a sale to Bass Pro, and even tried to get Bass Pro to sign a contract that would require operations to stay in Sidney after the sale closed. Bass Pro refused but did say in its announcement of a deal that it “appreciates and understands the deep ties between Cabela’s and the community of Sidney.” It didn’t commit to anything specific. Cabela helped found the company with his brother, Dick Cabela, and Dick’s wife, Mary Cabela.
» Elliott and Cabela’s management and board were in contact before Elliott publicly declared its stake in the company, and the two parties maintained communication throughout the sale process. Elliott also was not the only shareholder raising the idea of a sale.
» Bass Pro’s Chief Executive Johnny Morris called Cabela’s Director Mike McCarthy of Omaha roughly a week after Elliott disclosed its stake. Morris at the time said he was interested in buying Cabela’s, according to the documents filed this week. Three other “strategic bidders,” or other retail companies, also were interested in buying the company, along with several private-equity firms, the documents say.
Cabela’s declined to comment for this story, as did McCarthy, who also is head of an Omaha investment bank. Jim Cabela did not respond to a request for comment. A spokesman for Elliott Management did not respond to a request for comment.
As for Bass Pro, it said, in response to questions from The World-Herald: “We are committed to bringing these two organizations together, which will enhance our ability to serve sportsmen and sportswomen in an increasingly competitive environment.”
Cabela’s did not publicly announce that it had put itself up for sale until December 2015, after the activist hedge fund announced in October of that year that it had amassed an 11 percent stake in the company. But, according to the documents filed this week, the company was exploring a sale or other “strategic alternatives” as early as June of that year.
In a June 4, 2015, meeting, Cabela’s board and management discussed a letter from Hirzel Capital Management, a private investment fund in Dallas, recommending that the company sell World’s Foremost Bank, which runs Cabela’s credit card business. Hirzel also recommended that the retailer sell its real estate. Options discussed by the board then included a sale of the company or parts of it; selling its real estate; acquiring a new business; and repurchasing stock, according to the documents filed this week.
The retailer shopped itself around in July and August of 2015, the documents say. Five private-equity firms and five financial institutions were asked if they were interested in a deal. Ultimately, Cabela’s settled on a share buyback — which pushes the company’s stock price higher — and cost-cutting initiatives.
Enter Elliott Management: The hedge fund contacted the investment bank used by Cabela’s days before the fund declared its stake publicly to say that it had amassed shares of the company and intended to file documents with the Securities and Exchange Commission announcing the stake publicly. Elliott told Cabela’s it would push for change. The New York fund noted that share prices for Cabela’s had languished as it grappled with falling sales.
Following Elliott’s announcement, Cabela’s heard from other shareholders who also recommended that the company sell itself, according to the documents filed this week.
Cabela’s management met with representatives from Elliott in mid-November 2015. Elliott said then that the company should be sold via a public auction and that if Cabela’s didn’t put itself up for sale, Elliott “was prepared to take further steps,” according to the documents.
Cabela’s announced that it was exploring “strategic alternatives” — oftentimes Wall Street-speak for putting itself up for sale — on Dec. 2, 2015.
Elliott was kept apprised of the sale process throughout 2016, according to the documents. McCarthy told the board of directors on Aug. 12, 2016, that he intended to discuss a confidentiality agreement with Elliott so that he could “provide it some insight into the process.”
Someone else’s interest also was piqued by the announcement of Elliott’s stake: Bass Pro CEO Morris. Morris called McCarthy about a week after Elliott went public, indicating that Bass Pro was interested in buying Cabela’s. Other competitors — only referred to as “Strategic Parties A, B and C” in the documents — also were interested.
But Jim Cabela was not interested in that or a sale to any “strategic” buyer who intended to move the company’s headquarters from Sidney. Dennis Highby, a former Cabela’s CEO who still is on the board, agreed, and the pair said they would not be willing to vote their company shares for a sale to such a bidder. The pair recused themselves from further meetings in line with their fiduciary duty as directors.
Highby and Cabela tried to protect Sidney until the end, according to the documents. In the fall, before the deal was announced, they said they would agree to vote their shares for a Bass Pro deal if “the bidder were to make certain commitments regarding maintaining a presence in Sidney, Nebraska, following any potential transaction.”
They ultimately settled for the statement in the press release announcing the deal that nodded to Sidney’s importance to Cabela’s and vice versa. Still, analysts have said many jobs are likely to be lost in Sidney.
The board of directors — including Highby and Cabela — unanimously support the Bass deal, according to the documents filed this week, but it’s not clear how Cabela will vote his own shares; he owned about 16 percent of the company as of earlier this year, according to calculations from FactSet, a Wall Street data provider.
It’s unlikely that Cabela’s could have fetched a higher price than Bass offered from any of the companies that initially were interested in the retailer. “Strategic” buyers like Bass Pro are almost always willing to pay a higher price to acquire a competing company because they can save money after the deal closes by eliminating overlapping functions, while still adding new stores and increasing sales.
Documents filed with the SEC show that the headquarters will be in Bass Pro’s home, Springfield, Missouri. Bass CEO Morris said, in a meeting with Cabela’s employees last year, that he intends to maintain “important, significant jobs” in Sidney. Still, he said he wouldn’t make false promises, noting that there would be some “slimming down” as operations combine.
Nebraska Gov. Pete Ricketts and state and local economic development officials met with Morris and Bass Pro President Jim Hagale in October and November of last year to make a pitch for why Nebraska is a good place to do business. Ricketts’ spokesman Taylor Gage said the governor “has offered to make himself and his team available to them as they work to grow their business.”
Officials in Sidney also conducted an economic development study to see which industries and companies it should focus on recruiting.