Riddell Sports to acquire Varsity Spirit for 13.2 times net profit

Weekly Corporate Growth Report, Jun 2, 1997

The Deal: Riddell Sports has agreed to acquire the Varsity Spirit Corp. for $91 million in cash, or $18.90/share. On the news, Varsity Spirit rose $41 share, or 27%, to close at $18.50/share, while Riddell rose 75e/share, or 21%, to $4.375.

Discussion: Aside from designing and manufacturing cheerleader, dance team, and booster club uniforms, Varsity Spirit operates youth, junior high, high school, and college cheerleader and dance team camps, clinics, and competition. By organizing and producing various nationally televised cheerleading and dance team championships and special events, the company is able to promote its products and services. With a target strictly aimed at the youth market, its custom-made uniforms are and accessories are sold to customers in all 50 states, Japan, and Germany. Varsity is also an operator of a travel agency that is responsible for the organization of group travel tours within the US and abroad, including tours for school spirit groups. In 1995, Varsity contracted for its production requirements with eight independent garment manufacturers, utilizing 10 manufacturing facilities.

Riddell Sports manufactures and sells sports protective gear that is worn by the athletes that many of Varsity's customers are probably cheering for. Its football helmets are worn by a majority of football players throughout the world, including players on all NFL teams. The Riddell MacGregor and Maxpro trademarks are licensed to other companies for use on athletic footwear, apparel and equipment