Cabela's Stock Jumps on Acquisition by Bass Pro Shops

Image source: Cabela's.

What happened

Shares of retailer Cabela's (NYSE: CAB) soared on Monday after the company announced that it had agreed to be acquired by privately held Bass Pro Shops. At 11 a.m. EDT, the stock was up about 14.5% to $62.95, a few dollars short of the $65.50 offer price.

So what

Bass Pro Shops will pay about $4.5 billion in cash for Cabela's, with an aggregate transaction value of approximately $5.5 billion. This price represents a 19.2% premium to the closing price on Sept. 30 and a 39.7% premium to the closing price on Dec. 1, the day before news that Cabela's was considering strategic alternatives first broke. Cabela's expects the transaction to close during the first half of 2017, subject to shareholder and regulatory approval.

"Having undertaken a thorough strategic review, during which we assessed a wide variety of options to maximize value, the Board unanimously concluded that this combination withBass Pro Shopsis the best path forward for Cabela's, its shareholders, outfitters and customers," said Cabela's CEO Tommy Millner. "In addition to providing significant immediate value to our shareholders, this partnership provides a unique platform from which our brand will be extremely well positioned to continue to serve outdoor enthusiasts worldwide for generations to come."

Announced along with the acquisition was a multiyear partnership with Capital One. Cabela's CLUB, the company's co-branded credit card, will be serviced by the bank, and existing Cabela's CLUB customers should see no change due to the transaction.

Now what

Shares of Cabela's have been slumping for the past few years, with a string of mixed and negative earnings reports sending the stock lower. The deal price of $65.50, while well above the 52-week low of $33.03, is still below a peak of over $70 per share reached in early 2014.

CAB data by YCharts.

The offer price values Cabela's at about 1.1 times trailing-12-month sales and 24.5 times TTM net income. Cabela's operating margin was 7.7% in 2015, down from a peak level of 10% reached in 2013. Bass Pro Shops will no doubt aim to improve Cabela's profitability going forward.

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