Business Context and Reporting Period
This Form 8-K Current Report, dated March 6, 2020, is filed by Compass Diversified Holdings (CODI) and Compass Group Diversified Holdings LLC. The filing discloses a material acquisition event involving the purchase of Marucci Sports, LLC, a leading manufacturer and distributor of baseball and softball equipment headquartered in Baton Rouge, Louisiana.
Key Financial Metrics and Transaction Details
- Acquisition Price: $200 million in cash, subject to working capital and indebtedness adjustments.
- Target Financials: Marucci Sports reported approximately $14 million to $15 million in adjusted EBITDA for the trailing twelve months ended December 31, 2019.
- Ownership Structure: CODI expects an initial equity ownership of approximately 95%, with existing Marucci stakeholders retaining a minority interest.
- Funding Source: The transaction is expected to be funded via a draw on CODI's revolving credit facility.
- Capital Expenditures: Estimated to be less than $1 million for the year ended December 31, 2020, subsequent to closing.
Material Changes and Transaction Status
The primary material change is the execution of an Agreement and Plan of Merger on March 6, 2020. CODI, through its wholly-owned subsidiary Wheelhouse Holdings Inc., will acquire Marucci Sports. The transaction is subject to customary closing conditions, including regulatory approvals (Hart-Scott-Rodino Act) and the accuracy of representations and warranties. The closing is expected to occur within 45 days of the agreement date, though no assurances are provided that all conditions will be satisfied.
Outlook, Risks, and Contingencies
- Closing Conditions: The transaction is contingent upon the absence of governmental orders preventing the merger and the expiration of antitrust waiting periods.
- Insurance: CODI will obtain representation and warranty insurance at closing to cover breaches of certain representations, subject to deductibles.
- Guaranty: CODI has executed a guaranty for the Buyer's obligations under the Merger Agreement.
- Market Position: Marucci is described as the most popular bats in baseball, with hundreds of Big League players using its products.
Investor Verification Checklist
- Verify the final purchase price after working capital and indebtedness adjustments at closing.
- Confirm the successful satisfaction of all regulatory conditions, specifically the Hart-Scott-Rodino waiting period.
- Monitor the impact of the revolving credit facility draw on CODI's overall liquidity and leverage ratios.
- Review the definitive Merger Agreement (Exhibit 99.1) for specific indemnification terms and covenants.
- Assess the integration plan and the retention of key Marucci stakeholders alongside the 95% CODI ownership.