OnTheBlock: Riddell Sports Looks for a Buyer

Riddell Sports Inc. announced on July 25 that it had hired Lehman Brothers Inc. to help it look at strategic alternatives, including a possible sale or recapitalization of the company. David Mauer, CEO of the New York City-based company, said the stock price does not reflect the intrinsic value that Riddell believes it has created, nor its revenue and earnings growth. Riddell’s stock hit a 52-week high of $4.25 on the day of the announcement and moved higher to close at $4.50 on July 31. Riddell, which manufactures sporting goods under such labels as Varsity Spirit, Umbro, and Riddell, has a market cap of $37 million. Asked why the company chose to sell at this particular moment, CFO David Groelinger said, “It’s seasonal. This is the time of year when we make the most money. Why wait?” Buyers could be large sports equipment manufacturers such as Adidas-Salomon AG or Nike Inc. wishing to break into the junior high and cheerleading markets where Riddell has a dominant market share, said David Peterson, who covers Riddell’s bonds at Banc of America. Another option would be a helmet company such as Wilson Sporting Goods Co., wishing to capture Riddell’s 80% market share of NFL football helmets, he said. Riddell also announced its second quarter earnings, up to $6.4 million on revenue of $75 million compared with $5.4 million on revenue of $66 million in the year prior period. Mid-year totals have the company showing a loss of $278,000, compared with a mid-year loss last year of $1 million. Because of interest payments on acquisitions it has made, the company has not had a profitable year since 1996.