The Federal Reserve green lit the sale of Cabela’s financing arm to Synovus Bank Wednesday, meaning the $5 billion merger between the Nebraska-based outdoor retailer and rival Bass Pro Shops will go forward. (Photo: Dale Sparks/AP Photo)
Federal regulators approved part of the pending Cabela’s multi-billion dollar merger with Bass Pro Shops Wednesday, sending its share prices up more than 14 percent in after hours trading.
With the Federal Reserve’s green light on Cabela’s sale of its consumer credit financing arm — World’s Foremost Bank — to Synovus Financial Corp, out of the way, the $5 billion buyout deal can proceed.
Bass Pro Shops bought Cabela’s in October for $5.5 billion, or $65.50 per share. Later the Missouri-based sporting goods chain restructured the deal for a lower share price of $61.50.
After Cabela’s weak second quarter sales, however, investor analysts cautioned the retailer could be desperate to close the deal, while Bass Pro Shops may see its former competitor’s tumbling stock as a cost-saving opportunity. All eyes turned to the fast-approaching Oct. 3 deadline from the feds to approve the credit sale to Synovus, who will subsequently sell the operation to Capital One, while keeping $1.2 billion in deposits.
The positive market response is good news for the outdoor retailer after a long struggle with weak quarterly earnings and plummeting share prices.
“Merchandise sales were challenging in the second quarter,” Tommy Millner, Cabela’s chief executive officer, told investors last month. “Since the fall election, we have continued to see a slowdown in firearms and shooting related categories. This slowdown was even more pronounced in the second quarter due to the impact of inventory liquidation by a major competitor who has filed for bankruptcy as well as the anniversary of a number of events from a year ago, including the Orlando tragedy in June of 2016.”
Now, as the deal moves toward a close, the Lincoln Journal Star reports Bass Pro Shops will likely lay off some of Cabela’s 2,000 employees based at the company’s headquarters in Sydney, Nebraska. Cabela’s employs more than a quarter of the town’s 7,000 residents, according to the newspaper.
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