Vestis Retail Group, LLC (Vestis), which is owned by funds advised
by Versa Capital Management, LLC (Versa) and comprises Bob's Stores
(Bob's) and Eastern Mountain Sports (EMS), announced today that it
has signed a definitive agreement to acquire Sport Chalet, Inc.
(Nasdaq:SPCHA) (Nasdaq:SPCHB), a premier, full-service specialty
sporting goods retailer with 50 stores in the Western United
States. Under the terms of the agreement, an affiliate of Vestis
will commence a cash tender offer (the "Offer") for all of the
outstanding Class A and Class B shares of Sport Chalet for $1.20
per share.
The combination of Sport Chalet with Vestis's East Coast-based
retailers Bob's and EMS will create one of the largest sporting
goods retailers in the U.S., with more than 150 stores and $800
million in total sales for the 12 months ended December 31, 2013.
The new Vestis, through its three distinct brands, will have a
national footprint and offer an impressive assortment of branded
technical, performance and lifestyle merchandise, and customer and
specialty services combined with a unique and scalable online
presence.
"We are very excited to add Sport Chalet to the Vestis portfolio
– Sport Chalet greatly strengthens our position in the active
lifestyle and outdoor categories, provides scale from which to
grow, and diversifies our geographic footprint," stated Mark Walsh,
Vestis CEO. "Sport Chalet is in the midst of a transformation that
is making technology and customer service central to its
operations. It has made significant strides recently, as evidenced
by its market leading position in California, its Action Pass
customer loyalty program and its strong mobile sales platform. We
believe that Sport Chalet will benefit greatly from its addition to
Vestis. With the talent and resources that already exist within the
Vestis family, we envision a multitude of programs that will
leverage the knowledge, talent, and relationships of our three
retail companies to the benefit of customers and vendors
alike."
Craig L. Levra, Chairman of the Board, CEO and President of
Sport Chalet, will remain in his position as CEO at Sport Chalet
and continue to run this business out of Los Angeles, reporting to
Vestis CEO Mark Walsh. Vestis's corporate headquarters will remain
in Meriden, CT. Vestis does not anticipate any Sport Chalet store
closings as a result of this transaction. Sport Chalet, as is the
case with Bob's and EMS, will continue to operate under its
existing brand name.
Levra of Sport Chalet said, "For the past year we have
methodically explored a wide range of options to position Sport
Chalet for growth and to further our strategic initiatives. We
believe Vestis is the ideal partner given its base of stores in the
Eastern U.S. and synergistic vendor relationships, marketing focus
and inventory platforms. We believe we will be very well positioned
to compete in today's retail environment as part of a larger
organization with significant scale advantages and broad geographic
reach."
Levra continued, "We are working creatively as we tighten
controls for performance at the bottom line. We are ready for the
next step, and we look forward to working with a company like
Vestis that understands our customers, our market and our vendors,
and has the financial resources to help us grow the business."
Gregory L. Segall, Chairman of Vestis and CEO of Versa Capital
Management, stated, "We are pleased to broaden the geographic scale
and technological capabilities of Vestis with the addition of Sport
Chalet. We believe the combination of Vestis's well-recognized
brands will generate significant operational enhancements and
enable each Vestis company to continue to deliver great products
and service to their customers."
Sport Chalet's founding family members have agreed to sell to
Vestis all of their Class A and Class B shares, which represent
approximately 61 percent and 7 percent of the outstanding Class A
and Class B shares, respectively, at a price equal to $0.75 per
share immediately following and contingent upon the closing of the
Offer. In addition, each of Craig Levra, Howard K. Kaminsky, the
Company's Executive Vice President and Chief Financial Officer, and
Dennis Trausch, the Company's Executive Vice President of Growth
and Development, has entered into an agreement providing that each
of them shall tender all shares beneficially owned by them in the
Offer and otherwise support the acquisition and the Offer.
If the total number of shares tendered in the Offer, together
with the shares to be purchased from the founding family members
immediately after consummation of the Offer, do not constitute 90
percent of each class of shares of Sport Chalet on a fully diluted
basis, the price to be paid to stockholders in the Offer would be
reduced from $1.20 to $1.04 per share. Closing of the Offer is
conditioned upon, among other things, satisfaction of the minimum
tender condition of shares representing, when combined with the
shares to be purchased from the founding family members, at least a
majority of the voting power of Sport Chalet being tendered into
the Offer. Any shares not tendered in the Offer will be acquired in
a second-step merger (the "Merger") at the same cash price as paid
in the Offer. Sport Chalet expects the transaction to close before
the end of the calendar third quarter 2014.
For a more complete description of the definitive agreement, see
Sport Chalet's Current Report on Form 8-K filed with the Securities
and Exchange Commission (SEC) on June 30, 2014.
In addition to the Offer, Versa will be making a substantial
equity investment in Vestis and has received financing commitments
for a $180 million revolving line of credit with sufficient undrawn
availability after closing to fund the Vestis companies' ongoing
working capital needs.
Cappello Global, LLC/Niagara International Capital Limited acted
as Sport Chalet's financial advisor, and Duff & Phelps, LLC
provided a fairness opinion to Sport Chalet's board of directors.
Sheppard, Mullin, Richter & Hampton LLP served as Sport
Chalet's legal advisor. Sullivan & Cromwell LLP served as
Vestis's legal advisor.
The tender offer described in this news release has not
commenced. This announcement and the description contained
herein is neither an offer to purchase nor a solicitation of an
offer to sell shares of Sport Chalet. At the time the tender
offer is commenced, Vestis intends to file with the SEC a Tender
Offer Statement on Schedule TO containing an offer to purchase,
forms of letters of transmittal, and other documents relating to
the tender offer and Sport Chalet intends to file a
Solicitation/Recommendation Statement on Schedule 14d-9 with
respect to the tender offer. Vestis and Sport Chalet intend to
mail these documents to stockholders of Sport Chalet. These
documents will contain important information about the tender offer
and stockholders of Sport Chalet are urged to read them carefully
when they become available. Stockholders of Sport Chalet will
be able to obtain a free copy of these documents when available and
other documents filed by Sport Chalet with the SEC at www.sec.gov.
In addition, stockholders will be able to obtain a free copy of
these documents when available from the information agent named in
the offer to purchase or from Vestis.
About Sport Chalet
Sport Chalet (Nasdaq:SPCHA) (Nasdaq:SPCHB) is a premier, full
service specialty sporting goods retailer featuring the industry's
top sports brands in apparel, footwear, and sports
equipment. Founded in 1959 by Norbert Olberz, the company has
50 stores in Arizona, California, Nevada and Utah; an online store
at www.sportchalet.com; a Team Sales division; and offers more than
50 specialty services for the sports enthusiast, including online
same day delivery, climbing, backcountry skiing, ski
mountaineering, avalanche education, and mountain trekking
instruction, car rack installation, snowboard and ski rental and
repair, Scuba training and certification, Scuba boat charters, team
sales, gait analysis, baseball/softball glove steaming and lacing,
racquet stringing, and bicycle tune-up and repair at its store
locations. For more information, visit Sport Chalet at
www.sportchalet.com.
About Vestis Retail Group
Based in Connecticut, Vestis Retail Group was formed by Versa
and encompasses Bob's Stores (Bob's) and Eastern Mountain Sports
(EMS). Bob's is a 60-year-old, award-winning Northeastern
retailer of value-oriented footwear, apparel and work
wear. EMS is the second largest U.S. multi-channel retailer of
human-powered outdoor sports apparel and equipment with stores in
the Northeaster and Mid-Atlantic states. More information is
available at www.bobstores.com and www.ems.com.
About Versa Capital Management, LLC
Based in Philadelphia, PA, Versa Capital Management is a private
equity investment firm with more than $1.4 billion of assets under
management focused on control investments in special situations
involving middle market companies where value and performance
growth can be achieved through enhanced operational and financial
management. Versa's portfolio includes retailers Avenue
Stores, EMS and Bob's Stores; restaurants such as Black Angus
Steakhouses; community newspapers under Civitas Media; and
manufacturers that service a variety of industries. More
information can be found at www.versa.com.
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of and made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact are
forward-looking statements, including all statements regarding the
intent, belief or current expectation of the companies and members
of their senior management teams. These forward-looking statements
involve significant risks and uncertainties, including those
discussed below and others that can be found in Sport Chalet's Form
10-K for the year ended March 31, 2013 (and in Sport Chalet's
upcoming Annual Report on Form 10-K for the fiscal year ended March
30, 2014), and in any subsequent periodic reports from Sport Chalet
on Form 10-Q and Form 8-K. Vestis and Sport Chalet are providing
this information as of the date of this news release and do not
undertake any obligation to update any forward-looking statements
contained in this document as a result of new information, future
events or otherwise. Forward-looking statements can be identified
by the use of words such as "will," "could," "should," "may,"
"anticipate," "expect," "intend," "estimate," "believe," "project,"
"plan," "potential," "continue," or other similar expressions.
Forward-looking statements include, without limitation,
statements regarding business combinations and similar
transactions, prospective performance and opportunities, and the
outlook for Vestis's and Sport Chalet's businesses, performance and
opportunities; the expected timing of the completion of the
transactions contemplated by the merger agreement; the ability to
complete the transactions considering the various closing
conditions; and any assumptions underlying any of the
foregoing. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance
and involve risks and uncertainties and are cautioned not to place
undue reliance on these forward-looking statements. Actual
results may differ materially from those currently anticipated due
to a number of risks and uncertainties. Risks and
uncertainties that could cause the actual results to differ from
expectations contemplated by forward-looking statements include:
uncertainties regarding the two companies' ability to integrate
successfully; uncertainties as to the timing of the Offer and
Merger; uncertainties as to how many of Sport Chalet's stockholders
will tender their stock in the Offer; the possibility that
competing offers will be made; the failure of Sport Chalet's
stockholders to approve the Merger; the failure to complete the
Offer or the Merger in the timeframe expected by the parties or at
all; the possibility that various closing conditions for the
transactions may not be satisfied or waived; Sport Chalet's ability
to maintain relationships with employees, customers, or suppliers;
the negative effect of the economic downturn and the lack of winter
weather on the Sport Chalet's sales; limitations on borrowing under
Sport Chalet's bank credit facility; Sport Chalet's ability to
control operating expenses and costs; the competitive
environment of the sporting goods industry in general and in
Sport Chalet's specific market areas; the challenge of maintaining
Sport Chalet's competitive position; Sport Chalet's ability to
maintain the growth of its Team Sales Division and online business;
Sport Chalet's ability to regain or subsequently maintain
compliance with the requirements for continued listing of its
common stock; and changes in costs of goods and
services. These and other risks are more fully described in
Sport Chalet's filings with the SEC.
CONTACT: Sport Chalet Contact:
Howard Kaminsky, Chief Financial Officer
investorrelations@sportchalet.com
818.949.5300 ext. 5728
Versa and Vestis Contacts:
Chuck Dohrenwend, 213.371.5999, cod@abmac.com
Rivian Bell, 310.630.6550, rlb@abmac.com
Abernathy MacGregor
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