Black Diamond Equipment & Gregory Mountain Products Acquired By Clarus Corp.

Black Diamond Equipment & Gregory Mountain Products Acquired By Clarus Corp.

Posted May 10, 2010 at 11:11 am · Comments { 18 } ·

Via the American Alpine Institute’s twitter feed comes interesting news that well-known climbing gear companies Black Diamond and Gregory are being acquired in separate transactions by Clarus Corp. for a combined $135 million:

The combination of Clarus, Black Diamond, and Gregory (together, the “Company”) intends to serve as a public company platform within the outdoor equipment and lifestyle markets with opportunities for growth both organically and through targeted, strategic acquisitions.

Under the terms of the agreements, Clarus will pay $90 million in cash for Black Diamond, subject to adjustments, and $45 million for Gregory, subject to adjustments, approximately 50% of which will be paid with Clarus common stock valued at $6.00 per share and approximately 50% of which will be paid with a seven-year 5% subordinated note. In addition, certain shareholders of Black Diamond will use a portion of their cash consideration to purchase shares in Clarus at $6.00 per share.

As part of this acquisition, Clarus is seeking approval from shareholders to change their name to “Black Diamond Equipment” and move their headquarters to Salt Lake City, UT.

The story on MarketWatch.com also includes some additional details on the businesses of both Black Diamond and Gregory as well as the vision going forward for the combined company:

For the year ended December 31, 2009, on an unaudited basis, Black Diamond and Gregory together produced combined revenues of approximately $113 million.

…snip…

The Company believes that the integration and combination of Black Diamond and Gregory will produce incremental profit primarily from revenue synergies created through leveraging each business’ distribution network to grow various product categories and brands in geographies and end markets in which they currently are not sold, as well as from cost savings. Approximately 50% of the Company’s sales are expected to be in North America, approximately 30% in Europe, and approximately 20% in Asia, Africa, the Middle East and South America.

…snip…

“For nearly 30 years, Peter (Metcalf, Black Diamond Co-Founder) has grown Black Diamond and its predecessor from a business with under $1 million in annual revenue to one with approximately $86 million in calendar year 2009, a compound annual revenue growth rate of over 16%, which is nothing short of outstanding,” Mr. Kanders (Executive Chairman of Clarus) continued. “Importantly, both Black Diamond and Gregory grew their businesses even during the recent economic downturn.”

Peter Metcalf (Black Diamond Co-Founder) said, “We view today as a milestone towards fulfilling our dream of building a unique company in our industry. Black Diamond and Gregory have complementary product lines and distribution and the cultural fit between the organizations is excellent. We are excited to be working with Gregory and its Founder, Wayne Gregory. We now expect to have the opportunity for growth on a much larger scale than has been previously available to us as a private company and we believe that our financial and operational discipline will make us an excellent public company. We look forward to demonstrating a superior ability to create value for our customers, vendors, partners, and stockholders.”

It’s a bit unclear from reading the various stories and conference call transcripts what the new merged company will look like so I’ll update this post if more details become available.

Update: Press Release from Black Diamond

Update #2: Press release from Black Diamond CEO, President and Co-Founder Peter Metcalf which includes the following snippet:

What is not changing? Our commitment to our mission vision and values, and our efforts to help write the stories of the sports and the communities which inspire us. This shared passion is the universal Esperanto that connects us with fellow climbers & skiers no matter where we are.  We view this new route in front of us as not only a method to growth, but as a collaborative effort through which we will strengthen and expand the way we do business and our community of fellow users.

For those of you who have been around awhile this is not the first time we have stood in front of you and spoken about big change. In November 1989 we spoke about our vision for a future together and a business model driven by the ethos of our sports, lifestyles and culture. We would like to believe that the last few decades have validated that vision and our commitment to it. Looking forward at yet another clean undone line, BD remains more committed then ever to that vision. We understand that the future will be the only arbitrator and that talk at this point is just that, talk. You should have been here yesterday is now you NEED to be here tomorrow. Let the future be our judge.

Update #3: Statement on Gregory’s Blog

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  • http://generaldirtbaggery.wordpress.com Bob

    This is terrible news. How will selling the company to a conglomerate of share holders make it “unique company” in the industry. It has been argued that when profits and share holders take a front seat, innovation and quality products move to the back of room.
    Why? Because innovation requires that one take chances which may decrease the ability to “create value for our customers, vendors, partners and SHAREHOLDERS (!!!!!!)”
    Somehow the phrase “creating a quality product” isn’t highlighted in that press release.

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  • John

    NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO!!!!!!!!!!!!!!!!!!!

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  • http://www.mountainsandwater.com peter beal

    Nice catch on this news item Brian. This is a big deal on every front. My personal feeling is that this will not work out very well for anyone involved except the owners such as Metcalf who are selling their stakes. I am not an MBA but the sentence “As of March 31, 2010, Clarus’ net operating loss carryforwards were approximately $231 million” seems to indicate a company more concerned with accounting maneuvers than creating real value for gear users.

    Acquisitions like this typically start with an initial retention of the leadership of the acquired company but often within a year or two that leadership resigns or is forced out and the company is up for sale again. We’ll see how this works out. My guess is that the climbing community will be less than enthusiastic about it.

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    • http://climbingnarc.com Narc

      Clarus is a bit of an odd entity if you read more about their background. I don’t know that I understand all the accounting stuff but from what I can tell they haven’t actually conducted any business since the early 2002 when they sold all their e-commerce business. Since then they’ve just been sitting idle waiting for a new business to invest in apparently. There was also a pre-existing relationship between Kanders from Clarus and Schiller from Gregory.

      It’ll be interesting to see what happens. Climbers tend to always look negatively at these sorts of deals it seems, but since I really like BD’s gear I’ll remain cautiously optimistic.

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  • http://www.pembaserves.com Bryan

    BD purchase isn’t necessarily a bad thing. let’s put down the knee-jerk responses for a second…Metcalf (a stellar human being in his own right) is still up top, the company assets and infrastructure stays intact, and it sounds to me like the integration of Gregory will take a load off of BD’s pack development and production – mergers and acquisitions aren’t always murders and executions. For BD and Gregory, this could be a much needed influx of capital to grow both brands, continue development (which gets more expensive every cycle), and shore up a base of working capital (which EVERYONE had eroded away last year). Sure, some of the “core” users will take any indication that their beloved company isn’t the same as it was – those voices are likely the same that screamed “foul!” at the announcement of offshore production a few seasons ago, but still went out and continued to buy BD equipment, because they have and will very likely continue to make very good gear. Run-on sentences aside – we’ve seen this with Prana, Marmot, Mountain Hardwear, North Face, Kelty, Sierra Designs, and countless other brands in the industry – all of whom are still making excellent equipment and apparel that we all continue to support with our dollars.

    My initial reaction to the news was “Hm, that’s interesting.” I don’t see this affecting much at all, other than the “purists” continuing to shop online for brands they see that still have “integrity”.

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  • http://cremnomaniac.wordpress.com/ Rick

    That’s interesting news. I also see it as somewhat dubious. If the sale allows the current management of BD to retain control it may not be so bad. That is unlikely however. One should note that the Calrus website shows Peter Metcalf as a expected to be board member. This is a shared power position.

    “Clarus Corporation does not have significant operations. Previously, the company engaged in the development, marketing, and support of Internet-based business-to-business electronic commerce solutions. It intends to identify suitable merger partners or acquisition opportunities.”

    They are currently in the business of acquisition. They are not makers or producers of anything, not so good I’d say. It seems clear they are in it for the money, and who gets final say on equipment design, development, and quality is anybodies guess. Wait and see.

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  • climbingguy

    1. Nowhere in the info provided does it say that there will be “an injection of cash” into either company. In fact, a large chunk of the transaction is just an IOU in the form of a 5% subordinated note. That is an I.O.U, folks….not cash.
    2. The rest of the deal is comprised of 6$ per share stock certificates for a stock that hasn’t traded that high since mid 2008, despite the 60% run-up in the market in the last 7 months.
    3. Clarus HAS NO PRODUCTS. It is ,according to Google finance, a holding company for the proceeds of the sale of a software/internet company.
    4. The 20% bounce that the Clarus stock got as a result of this announcement makes it a perfect time for the CURRENT SHAREHOLDERS to cash out, leaving BD and Gregory with instantly depreciated stock and an I.O.U that they owe to themselves.

    To me, this looks like a clever (for the Clarus guys) way to make some money by buying out 2 great companies that have actual physical assets. They say they’ll create value by “grow various product categories and brands in geographies and end markets in which they currently are not sold, as well as from cost savings.”

    Really. And where are the markets in which Gregory packs and BD Cams are in such high demand that people who want them can’t get them? (Nowhere).

    The magic phrase here is “cost savings”.

    Cheaper materials, cheaper (unregulated) labor are the two ways that come to mind.

    The only way I could see this being a financial benefit to either company would be if BD or Gregory were carrying some expensive debt that Clarus could pay off, saving interest expenses.

    I simply don’t see this as anything other than some slick Connecticut lawyer/accountant types finding a way to takeover two real businesses for a short term boost in stock price of a stagnating Clarus pink sheet stock. Oh, and now Clarus has ways to write off more business expenses from their taxes..saving money for the Ct. folks, but not doing much of anything for BD or Gregory.

    That is my opinion.

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    • Mike

      You are dead on the money in your analysis. Venture Capital, in my view, has been the biggest negative game changer for the outdoor industry in the past 20 years.
      Venture Capital only gives money if their is an exit strategy.

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  • http://www.dirtbagdiaires.com the dirtbag

    Thanks Narc…It’s so crazy how you have become the go-to-guy for a lot of different climbing news whether it’s new boulder problems or this.

    Seriously, thanks for doing what you do.

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  • http://easternclimber.com EasternClimber

    Here’s the official word from Metcalf himself:

    http://www.blackdiamondequipment.com/en-us/journal/news/company/birth-of-black-diamond-20

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  • More Info

    From Metcalf’s memo( http://www.blackdiamondequipment.com/en-us/journal/news/company/birth-of-black-diamond-20 ):

    “Most recently, they built and operated Armor Holdings, a company that designed and built a wide variety of personal protection and safety equipment.”

    Uh huh. It appears that they then SOLD Armor holdings right before its executives were charged by the US Department of Justice for violation of the Foreign Corrupt Practices laws.http://jacksonville.com/news/metro/2010-03-07/story/armor_holdings_elaborate_sting_set_up_a_number_of_meetings

    Besides the criminal charges against its exec, Armor Holdings eventually settled civil charges with the DOJ for 30 Million dollars for violation of the Federal False Claims act…they apparently sold defective body armor to the Military.
    http://en.wikipedia.org/wiki/Armor_Holdings,_Inc.

    I don’t know. This just doesn’t bode well for me.

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  • Pingback: Black Diamond Equipment Going Public : Splitter Choss

  • http://www.laurenhillwilson.blogspot.com Wilson

    My first reaction is ‘uh-oh’. When you try to merge cultures of two companies, inevitably a portion of both company’s personality is lost. To what extent this affects the end product is to be seen, but it can be a rough road. It’s a positive sign that they are keeping most of the top guys from each respective company on for the transition, but as it might have been mentioned that will likely change in a year or two. Remember, BD could have decided to not have been bought out, but obviously this aligns with whatever vision of growth they have. Obviously they couldn’t do it organically, so going public or merging with someone else was their only choice.

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  • ian

    I can’t believe Black Diamond Sold out??? No out door company ever sells out to make their company or their products better they just do it to make more money. Why would Black Diamond need to and Metolius, DMM, Wild Country, Petzl, Grivel all not need too.

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  • Blake

    As someone in the know – various friends who work there. Most of the employees (the smart ones) see it as more work for them as the integration (like VF had with TNF) and various others becomes a headache. Employees (other than Metcalf and Grover and board folks) are not going to see much of a change for a few years and they def. won’t benefit as I highly doubt the majority of them own shares, which won’t do much anyways longterm. Metcalf (awesome guy by the way) and Grove are looking for ways to get out and this is the easiest option. Company probably won’t change much and they can bail in a few years to Mehico and wherever with some coin in there pocket. BD leveraged the crap out of their capital with the new boot line, a slew of new skis, new forging for biners, new ops in Asia and Euro, and a website (which kind of blows by the way), and selling out why they looked good to potential suitors was the best bet. I really don’t see BD becoming this monster company who swoops in and buys other small outdoor brands and becomes a powerhouse. For one the industry is very stagnant, two banks aren’t going to take a risk on loaning money for ventures like that, and three what the hell is the point of having two pack companies under one banner (see jansport and TNF). Dollar dollar bill yall.

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  • Hans_krugger

    What a sell-out. I consider this betryal.  The ethics of climbing that were developed in the 1970s have been murdered and this move is the headstone that makes its grave.  I will never buy a piece of Black Diamond gear. Its old stuff from E-bay from now on!

    This is not what Chouinard had in mind when he helped these jerks get started.  What a bunch of spineless money grubbing yuppies they have all become.

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