• Sierra Bullets Sold to Clarus Corporation

    Clarus Corporation (NASDAQ: CLAR) has completed the acquisition of Sierra Bullets, L.L.C. (“Sierra”) for $79 million, subject to a post-closing working capital adjustment. The transaction is expected to be immediately accretive to Clarus’ earnings per share.

    Since 1947, Sierra has been dedicated to manufacturing the highest-quality, most accurate bullets in the world. From local and international shooting competitions to sport and hunting, Sierra offers best-in-class accuracy and precision that hunting and sport shooting enthusiasts have come to depend on. This performance is born from a proprietary manufacturing process that enables the achievement of the tightest tolerances in the industry.Sierra’s products have cultivated a significant consumer following recognized by its iconic “green box” packaging and include globally recognized brands such as Sierra MatchKing, Sierra GameKing, and Sierra BlitzKing.

    In addition to a wide base of retailers, Sierra’s customers include distributors, law enforcement agencies and industry OEMs. This diversification is further enhanced by an approximate 400 SKU offering, which has historically mitigated customer and product concentration risk. As a manufacturer of premium products targeting outdoor sportsmen, Sierra believes it has been relatively insulated from exogenous demand volatility. Its premium sales channels have also historically been less susceptible to discounting, driving higher margins for Sierra’s retail and OEM customer base.

    For the unaudited 12 months ended June 30, 2017, Sierra’s total revenues were approximately $32 million with EBITDA of approximately $12.5 million, representing a purchase price multiple of approximately 6.3x EBITDA. Sierra has a strong cash flow profile, generating free cash flow conversion of approximately 95% with limited ongoing capex requirements.

    “The team at Sierra has continued building on a 70-year legacy dedicated to the highest-level of precision in design, world-class manufacturing and quality control,” said Warren B. Kanders, executive chairman of Clarus. “These attributes have cultivated a diverse customer base of enthusiasts and industry OEMs that drive high recurring revenue and strong cash flow, which we expect to maximize through the utilization of our net operating loss carryforwards.”

    Clarus expects to leverage its various strategic and financial resources to accelerate Sierra’s growth. This includes investments to enhance marketing and digital capabilities, improve distribution, forge new customer accounts, and develop new products.

    Sierra is led by a seasoned senior management team with decades of combined manufacturing and industry expertise that is dedicated to the long-term growth of the brand. All senior management are expected to remain with Sierra under Clarus’ ownership.

    Sierra’s President Pat Daly commented: “Our team takes great pride in developing and manufacturing the most precise and accurate bullets in the world. This is supported by our deep institutional knowledge of highly-specialized manufacturing processes that have produced leading products and created a significant competitive advantage. As the only pure-play bullet brand, it was important for us to partner with a team that shares our values and commitment to excellence, and we are excited to join the Clarus family. I look forward to staying on to continue driving our brand growth.”

    In connection with the transaction, Clarus increased the size of its senior credit facility from $20.0 million to $40.0 million.

    An updated financial outlook and further discussion on Sierra is expected to be provided during Clarus’ third quarter 2017 earnings report.

    Kanders concluded: “We remain committed to seeking to acquire additional companies in industries potentially unrelated to outdoor that satisfy our investment criteria as we found in Sierra. In addition, the minimal leverage incorporated in this transaction and Sierra’s free cash flow dynamics are expected to provide capacity for future acquisitions utilizing our structure.”

    Comments 18 Comments
    1. Texas10's Avatar
      Texas10 -
      I looked up Clarus (CLAR) and found this on their homepage:

      Clarus Corporation (NASDAQ: CLAR) is a holding company which seeks opportunities to acquire and grow businesses that can generate attractive shareholder returns. The Company has a substantial cash balances and net operating tax loss carryforwards which it is seeking to redeploy to maximize shareholder value in a diverse array of businesses.

      It's the second sentence that says it all regarding Sierra's future, and it's looking pretty dark, IMHO.

      Here's the link: http://www.claruscorp.com/

      They are previously known as Black Diamond.
    1. 243LPR's Avatar
      243LPR -
      Looks like a lot of words meaning "you're goin down". The article says nothing about the other companies they own,liberal gun haters??
    1. sharpshooter's Avatar
      sharpshooter -
      Amidst all the mumbo jumbo and 10 dollar words, they believe that they bought a cash cow. Give then time...they will milk it dry.
    1. yobuck's Avatar
      yobuck -
      I suppose everything has a beginning, and everything has an end, unpleasant as it sometimes is to be a witness.
      When I was a young kid, a big family outing was a trip from the suburbs to Sears & Roebucks in N/E Philly in the 37 Ford.
      Probably by this time next year whats left of them will be gone also, as have many others thru the years.
    1. WV1951's Avatar
      WV1951 -
      To expand a bit more.

      "Clarus Corporation, formerly Black Diamond, Inc., through its ownership of Black Diamond Equipment, Ltd., is engaged in designing, manufacturing and marketing of active outdoor performance equipment and apparel for climbing, mountaineering, backpacking, skiing and a range of other year-round outdoor recreation activities. Its principal brands include Black Diamond and PIEPS. It offer a range of products, including apparel, such as jackets, shells, pants and bibs; rock-climbing equipment, such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear; technical backpacks and high-end day packs; tents; trekking poles; headlamps and lanterns, and gloves and mittens. The Company also offers advanced skis, ski poles, ski bindings, ski skins, and ski safety products, including avalanche airbag systems, avalanche transceivers, shovels and probes. The Company's products are sold in North America, Europe, Asia, and the rest of the world in over 50 countries."

      Bullets sure don't seem to fit their scheme of things. Sierra was a privately held company, so I am sure many employees at Sierra are very concerned, especially management. Clarus is a small company, actually a micro cap, and I am surprised they are listed on NASDAQ, but being on NASDAQ does indicate it is a solid company. But I am concerned where Sierra will be in two years.
    1. JeepsAndGuns's Avatar
      JeepsAndGuns -
      My question is, if you have a successful and profitable company, why sell it? Or has sierra been in secret financial trouble?
    1. hereinaz's Avatar
      hereinaz -
      You sell cause you want the money and you quit working. You sell when the family wants out. You sell after someone dies cause the IRS gets nothing. And....

      Black Diamond made the climbing gear I tied to rocks and wrapped around my body to jump off cliffs...

      Sent from my SM-G920V using Tapatalk
    1. J.Baker's Avatar
      J.Baker -
      Doom and gloom! Doom and gloom!
    1. Robinhood's Avatar
      Robinhood -
      Quote Originally Posted by hereinaz View Post
      Black Diamond made the climbing gear I tied to rocks and wrapped around my body to jump off cliffs...
      Sounds like a plug to me. My concern is more connected to political climate in the future. We are seeing everything in our sport being taken over by investment firms. When the profits go the business is shed usually being stripped down and sold off with little left to be of any use. This is one way for the future politics can eliminate a supply to the citizens they need to control.
    1. Cookie's Avatar
      Cookie -
      Business owners retire, get old. It happens. Time will tell how this sale goes. As long as it doesn't follow Remingtons path I think it'll be ok.
    1. psharon97's Avatar
      psharon97 -
      Gun companies have a storied history of doing this. Some companies fall by the wayside after they have been dumped, others reinvent themselves. Given Sierra's name, I'm hoping they'll be alright.
    1. RC20's Avatar
      RC20 -
      Its more given Sierra products, including their unique reloading manual I hope for the best.

      You have to be concerned when holding companies rename themselves.

      And if they are looking for a cash cow will they kill the golden goose?

      All legitimate concerns and not a darned thing we do about it.

      I do think Hornady across the board is giving Sierra a run for their money at lower prices and then you get into discounts and the cash flow is not as good.

      What you prefer to see is a holding company that either wants to maintain and advance a company or one that cleans up a problem company for resale.

      Maybe sour grapes but this company does not look like it and the fit is not close in line with their other products that apparently are not all that successful.

      Longer term I expect we will see it sold again and hopefully to a better buyer and that its not run into the ground completely or can be resesutated .

      I don't think target shooting has taken the hit guns sales have so its one of those viable in all climates type companies and I would have thought they could have found a more suitable buyer.

      We used to have a great hardware store, the owner died and the employees tired to work a buy out. One of those iconic places that would have done fine.

      Owners saw money in the various parts of the property and took it and ran, no more hardware store.

      Ie. they may have gone for the biggest bucks and not the best long term for the Sierra and its employees. Sadly nothing new in that anymore.

      Years back I had hoped to sell our house for a reasonable price when the time came so that someone else could get themselves established . With the crash of any retirement accounts, no pay raises that is not feasible, its all we have of major value and to get by we have to maximize it. Sad as well.

      The next generation inherits a pretty mucked up world.
    1. RC20's Avatar
      RC20 -
      I did some more reading, the company looks to be recovering from growth induced chaos.

      Having been a part of a company that tried to emulate the big boys and failed miserably, it resonates.

      They tried to branch out into apparel and got burned. Sold off a company they bought, got out of apparel, found making things in China didn't work, their new CEO could not handle it so they had management lockup.

      Oddly Sierra for not being a core to what they do does have a core (pun intended) to their base business. More a custom maker to specific market that has solid tech and quality control being critical (ie bring back mfg from China)

      I would put Sierra into a niche that might fit what they are working getting back to, small well run high quality product.

      REI is a big buyer of the climbing stuff, not to be sneezed at.

      Debt load seems to be an issue but if they can keep on course they could wind that down as Sierra probably does not need to expand.

      Should be interesting to watch, maybe more hopeful that I started.
    1. RustyShackle's Avatar
      RustyShackle -
      I'm just hopeful that their product quality is maintained. I love Sierra GK's. One of the best shooting and performing hunting bullets IMHO.
    1. RC20's Avatar
      RC20 -
      After the in depth end I think it will be.

      While vastly different parts of the sports fields, the climbing end is very driven by quality due to the hazards, lots of recalls from all of them, not an easy thing to maintain with relatively smaller volumes.

      The fact they pulled out of China says loads.

      Sierra has the same aspect of quality for different reasons but the philosophy is the same (or is now!)

      While Sierra turns out millions of bullets they are a small operation which fits in with BDs operation and both are sports that their existence depends on maintaining quality.

      It may be good in the end as Sierra has not updated their manual in a long time, maybe with longer term horizon they will do so.
    1. yobuck's Avatar
      yobuck -
      A little information on the Sierra sale.
      My old and good friend George returned Saturday from a prairie dog hunt.
      George has been finding reasons to head west hunting about every year for about 40 years.
      Some years he also stops by Sierra bullets which he refers to as the candy store.
      We have lots of containers filled with seconds which are in large barrels in the store and sold by the pound.
      Anyway he was there this past Friday, when a man walked up to him and introduced himself.
      Turned out to be Patrick Daley who is the president of the company.
      He told George nothing will change other than who they mail checks to.
      He had toured the facility before, but this time he got the grand tour including a basement level 200 meter indoor test facility with over 200 different barreled action test guns on hand.
      So at least the employees seem to be unconcerned about the sale.
    1. deerhunter99's Avatar
      deerhunter99 -
      Well that is great news, the Game King 100gr 6mm bullet is a very good one !!!
    1. FreqRideR's Avatar
      FreqRideR -
      Wow! Black Diamond is a top notch company known for quality products you can trust your life with. But too much diversity is not always a good thing. Bullets? I'm thinking they just liked the name Sierra! Lol