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Black Diamond Merger


Submitted by admin on 2010-05-11

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Dear Black Diamond Employees, Friends and Colleagues:

This is a milestone day for Black Diamond. When we founded this company, we wanted to build great products to maximize the enjoyment and safety of the sports we love so much. More, we wanted to build a company that reflected, respected, and championed our lifestyle and values as climbers & off-piste skiers. Though you never arrive at your destination, we are proud of what we have accomplished and the style in which that has been achieved. Together, we have built a truly special, global company and I would like to take this moment to express my most heartfelt thanks all of the employees, friends, customers, vendors, and consumers that have helped us along the way.

Authenticity is a word that gets thrown around a lot. For it to actually mean something, which it does at Black Diamond, we live and breathe the sports we represent and reflect that in our business practices. We approach business like we do climbing. As you can appreciate, there is precious little room for error in either. When we climb, we learn to make careful choices, act as a team, proceed purposefully, realistically assess risk, and ensure that we are protected against it. At the same time, we know how to maintain focus and, when necessary, to act decisively and aggressively to make progress. We constantly adapt to the route in front of us. That we approach our business the same way is no accident.

Today, we have a new route and new summit to tackle. I am incredibly pleased to announce that Black Diamond is entering into a transaction with Clarus Corporation that will simultaneously make us a public company and merge the operations of Gregory Mountain Products with Black Diamond. Gregory is a great brand and business that I’m sure you are also familiar with. The rest of the executive team at Black Diamond and I will continue our roles, but with the added challenge and responsibility of growing the business as a public company. For nearly 30 years I have led the growth of this company and it’s predecessor from a sub $1million/year business to one that continues to grow at a double digit rate, surpassed $92million in annual revenue in the past 12 months, and has double digit growth in Fall’10 bookings. Over those nearly 30 years the mantra has been to build a beautiful and respected “built to last company”. As of 2010 we have achieved nearly every component of that approach other than the capital structure and the backstop for management, especially myself. With this deal, the last pieces of that global, built to last, foundation are being put into place. We are all really excited for that.

Clarus Corporation is a public company with no operations but strong financial resources. They have been searching for a long time for the right business to help build and we feel most fortunate to have connected with one another. After the deal closes, which should be sometime in June, Clarus expects to change its name to Black Diamond Equipment. The managers of Clarus and owners of Gregory, Warren Kanders and Rob Schiller, will provide us with guidance and financial support. Their track record is outstanding. Most recently, they built and operated Armor Holdings, a company that designed and built a wide variety of personal protection and safety equipment.

What is not changing? Our commitment to our mission vision and values, and our efforts to help write the stories of the sports and the communities which inspire us. This shared passion is the universal Esperanto that connects us with fellow climbers & skiers no matter where we are. We view this new route in front of us as not only a method to growth, but as a collaborative effort through which we will strengthen and expand the way we do business and our community of fellow users.

For those of you who have been around awhile this is not the first time we have stood in front of you and spoken about big change. In November 1989 we spoke about our vision for a future together and a business model driven by the ethos of our sports, lifestyles and culture. We would like to believe that the last few decades have validated that vision and our commitment to it. Looking forward at yet another clean undone line, BD remains more committed then ever to that vision. We understand that the future will be the only arbitrator and that talk at this point is just that, talk. You should have been here yesterday is now you NEED to be here tomorrow. Let the future be our judge.

— Peter Metcalf

CEO/ President & Co-Founder

Source: Black Diamond Equipment.


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33 Comments CommentAdd a Comment

 eastvillage
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 2010-05-11
Hmm, BD, now a publicly traded company? I guess that means that future any quarter where an "analyst" doesn't like the "growth" or "earnings" of the company can now speed the movement of all remaining US manufacturing to "lower cost" and "more efficient" countries.
"Clarus Corporation is a public company with no operations but strong financial resources."

Translate that into they haven't manufactured anything in their life and now they want to get into a business where the quality of the manufactured object is paramount. Sounds like a good fit to me!
Of course, this will result in no conflict with their new Wall Street driven mantra to eternally lower costs and increase profits. Sure no problem. I'm sure the analysts at Goldman Sachs get up to the Gunks now and then and have more than an intellectual appreciation for a well made piece of gear. Of course they do.
 tpro
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 2010-05-11
I agree with Eastvillage...this doesn't look good on the surface. When "bean-counters" get involved with any quality business in N.America, it usually spells disaster and lost manufacturing to some sleezy off-shore locations. I truly hope the quality that we climbers stake our lives on is not jeopardized by this busine$$ decision!
 baigot
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 2010-05-11
Sounds very bad. Thats very bad...that merge means, even low cast of the product to maximize or increase profits, at expenses of lower quality products (often made in very 3rd world countries). I think its not bad at all doing that but we know how operates all the firms (i quote BD own words) that are "public companies" with "no operations but strong financial resources". That´s a joke, it means sink BD to get all the U$S can get in the shorter time they can. All who know micro and macro economy knows how companies with "no operations but strong financial resources" works. I´m very sorry about BD.
 domu888
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 2010-05-11
I guess things will be okay for the next few months and then come the next ski season ("Fish-filled barrel season" is the correct financial jargon, I believe) things will change.
 blacktotem
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 2010-05-11
It was only a matter of time. I had always held BD high as an example of a mission driven company resisting the corporate pressure for maximized expansion and profits. After all, this is a company which literally began in the form of Yvon Chouinard banging out pitons in a parking lot in Ventura. I wish I could hold out hope for BD at this point, but I've seen this too many times (Dana Design for example). Its over.
 montrealclimb
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 2010-05-11
There's always petzl...
 fluxus
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 2010-05-11
I'm not so fast to say this is a bad thing. Peter is being made president and CEO of Clarus so he has the same position in the new venture that he did at BD. I think his leadership at BD has been very positive over the years. In addition Clarus is reported to have 82.4 million in cash which could be used to fund an expansion of BD without borrowing any money. BD is only "over" if they suddenly decide to fire the design team and forget the central mission. I'm very skeptical concerning the prospects of that happening. Also keep in mind that the guys at Clarus are not bean counters their last project involved growing a company from an $11 mil. a year company to a 3.5bil company in 10 years time. They are growth guys, which means growing sales.
 sosure
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 2010-05-11
The new owner Kanders, and his parter, Schiller, aren't growth guys, they are mergers and acquisition guys. They grew Armor from $11 mil to $3.5 by acquisition, not organically. (Their boy GW's wars helped a bunch too). Roll em up and flip em over is the business model; this is no longer a company for the long-haul, its a horse for trade. When it comes time to cash out, your safety is an afterthought.


 tradrenn
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 2010-05-11
DMM for live, I guess.
 fluxus
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 2010-05-11
Sosure, If that's the case I have no idea why Peter Metcalf would agree to merge with these guys. I knew Peter and the rest of the BD staff when I lived in SLC and was sponsored by BD. I tested products for them and saw the company from the inside on a daily basis. I can't imagine Peter, or anyone else at BD knowingly turning the company over to a couple of sharks just looking for a quick flip. Do you think that Kanders and Schiller have everyone at BD fooled and that as president and CEO of Clarus, Peter won't be doing the same thing he's been doing for years? There are probably good reasons to not like this sale but to pretend the folks at BD have sold out, are idiots or gone completely, raving, mad makes no sense at all.

Also, if K&S are just looking for quick flips why have they been sitting on their capital since 2002? Certainly in 8 years there have been other opportunities to make a quick buck?

 k.l.k
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 2010-05-11
This isn't "news" (in the sense of the term that applies to journalism) nor is it an article.

This is a PR release from corporate. It isn't just another typical PR byte of the sort that regularly runs on the front page, either--

it's an advert dealing with a fairly serious news story, at least for the climbing community.
 montrealclimb
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 2010-05-11
Someone else needs to make good competitors to camalots and express screws, quick.
 dugl33
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 2010-05-11
http://www.google.com/finance?q=OTC:CLRS

http://www.reuters.com/finance/stocks/keyDevelopments?symbol=CLRS.PK
 hugepedro
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 2010-05-12
"The rest of the executive team at Black Diamond and I will continue our roles, but with the added challenge and responsibility of growing the business as a public company. For nearly 30 years I have led the growth of this company . . ."

There's a big red flag right there. Leading a private company is one thing, quite a different thing from leading a publicly held company. I wonder how many executives on the team have experience leading a public company, or even guiding one through an IPO. To me, this press release has a bit of an air of naivete. If you want to swim with the sharks, first make sure you are not a guppy.
 rockgirlCO
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 2010-05-12
Just my two cents: 1) for profit corporations are obliged to make a profit for their shareholders; there will be non-passion driven people leading this company, period. 2) BD cams are already made in China.
I have deep concern over this change. I think hugepedro's last sentence is very pertinent.
 sosure
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 2010-05-12
Fluxus asks (me) why Metcalf would agree to this merger. My guess is that this was the only available option or perhaps the highest bidder. Metcalf wants to expand BD significantly and he can't do it with the current, limited, capital structure and his partners (it turns out that less than a dozen people own more than half of this "employee owned" company) aren't willing to commit more equity or publicly list the company -- they want or need out, now. They sold for $90 million, or roughly revenues. Most of the items sold by BD are fairly high margin, and there are some that are huge: headlamps, trekking poles, softgoods are all high volume, high margin products. My guess is that after they get done paying interest to Zions and Credit Suisse (they have some debt) there isn't a whole lot of income left over to buy patagonian ranch houses with. I would further bet that Kanders sold Metcalf on the idea that even though Kanders is the controlling owner, he will be a totally hands off guy and let Metcalf run the company however he likes. As hugepedro and rockgirlCo point out, Metcalf is a guppy. He who pays the piper calls the tune and Kanders knows only one song: roll and flip.
So I'm upset about this deal, upset about where it leaves the climbing community (with one less real manufacturer), and upset at the selling partners in BD for not finding a less problematic buyer or listing the corporation themselves and hanging on for a few more years.
Let me make something else clear: there are lots of Wall Street/Private Equity corps that could have been acceptable buyers for BD. Sure, I'd prefer that the company continue under the ownership of climbers/former climbers, but I also know there are some benefits to being publicly listed, especially if you have big growth plans. The problem here is that the dance partner BD came up with is very possibly the worst conceivable choice: Kanders is an war profiteer who has a demonstrated track record of delivering defective life-saving equipment (body armor) to the US Military (who have stringent purchasing standards) AND a further record of demonstrating extreme callousness for his customers well being (refusal to accept a _blank check_ from the military to license the specs for Humvee armor plating because it would adversely affect his company's "competitive position").
In the short term things may look up at BD, they will roll out goods in new product categories, they will acquire some smaller companies and help bring their products to market quicker etc.., the problem is that all of this is ultimately aimed at producing three or four quarters of exceptional growth to induce some other buyer to come in and buy them out at an inflated price. When that time comes (between 5-10 years from now, the plan is "roll and flip", not "quick flip"), and no one but Kanders will know when that time is, everything will take a backseat to gaining maximum value for the shareholders (Kanders being shareholder numero uno). Relying on their products will be gambling with your life.
Finally, you ask why K has been sitting on his capital for 8 years if he's a quick flip artist. He's hasn't been, he's been sitting on a pile of mostly other people's capital and paying himself big bonuses the whole while. Kanders took control of CLRS in 01/02, I believe. In 02 he owned 1.6X million shares. Between July and December 08 he acquired 1.4X million shares between roughly $3.75 and $5 and before the transaction he owned 3.2 million. K&S will receive a further 3.75 million shares (plus $22.5 million of company debt) for Gregory. Why didn't he buy something into the Clarus shell before? Don't know exactly. Could be he's patient. He waited for a market crash and now that the market appears to be emerging, he's buying something. If you look at his track record with Armor Industries, he's a very smart investor. That's a nice skill to have, he might also be a very genial, affable person. Whatever his virtues or vices may be, he's not someone I will purchase critical safety equipment from.

 alpine_monk
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 2010-05-13
well sosure...... I just shed a frickin tear. RIP BD
 k.l.k
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 2010-05-13
"The problem here is that the dance partner BD came up with is very possibly the worst conceivable choice."

A point worth underlining.
 durfey
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 2010-05-13
I was initially opposed to the building of Black Diamond Cams outside of the US. They are being made in China. CHINA!!. I don't trust anything made in china. Definetly not something I am going to trust my life with. Indeed a sad day. No more BD products for me. You have lost a customer forever.
 gobirdgo
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 2010-05-14
Not all publicly traded companies act like GM, Yahoo, etc. and are actively traded and worried about quarterly results. Some act very much like privately held companies. I don't know the details of this transaction, but there is a decent chance not much will change.
 Crack_Addict_Ty
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 2010-05-14
As was stated prior, BD cams are already made in China and have been for at least a couple years now. I have only been buying climbing equipment for a few years, but has anyone noticed a change in Black Diamond quality since they started making cams in China?
 sjderis
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 2010-05-14
I ll stay with Metolius and DMM - Not to jump on the bandwagon but I work for a company that just merged and the " bean pushers" are just that. When its time to trade quality to up the % of profit, it will happen so fast it will make your head spin. And, since they are protected by massive acquisition lawyer backed "law" your broken body will not get so much as a nod. RIP BD
 doktor_g
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 2010-05-15
I wonder if MSNBC reads rockclimbing.com? Seems like this would count as negative web chatter. I kinda figured BD was an aquisition target a few years back. I'll give them a chance for a year or so, because they've made quality gear for my entire climbing career, but I'll drop their merchandise like a bad habit if I start to hear or experience a decrease in quality. Hopefully I'm not the one dropped like a bad habit. All in all, I'm not too happy about this deal, but I'm an old white male and don't like change.

Get off my lawn!!!

Dr. G
 cencalclimber
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 2010-05-15
Haha.. I love the way climbers are against the Man. If there was ever a time for CCH to get their act together, now's the time! I need some aliens.
 redsolarearth
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 2010-05-15
Likely there will be no noticeable change for a while, then a steady but hardly perceptible drop in quality.
 ClimbSoHigh
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 2010-05-18
RIP BD. You have lost my hard earned dollar. We all know that quality control is the first thing wall street bean counters look to cut, and I do not want to be the first victim to give BD a bad name. When other brandnames sell out, the consequence is that your stereo shorts out, worst case a fire. When BD sells out, people are going to die! (Maybee I should buy my last set of camalots now before the transaction goes through and expenses start getting cut). I hope CAMP or Metolius start producing double axle cams once the BD pattent runs out in a few years, they can have my hard earned dollar instead.

And cencalclimber... CCH is going on the auction block or going to be liquidated soon since the co-owners untimely death, not to mention the pattent on their cam head profile has expired. CCH will be a thing of the past by next year. Anyone intersted in starting a company that produces aliens, camelots, and stoppers in the next 5 years?

The only thing I hate more than the man, is greedy ass wallstreet. The day this goes through, I will never buy a BD piece of gear again. BD is on it's way to becoming too big for it's britches. Remember private companies are led by the president/owner while public companies are led by greedy investors who want an "acceptable" return on their investment NO MATTER WHAT!
 ClimbSoHigh
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 2010-05-18
Further thought, Conventional marketing will not work on the climbing community. No matter how much money they throw at convincing us they are the same reputable compnay, the cliffs will chatter about the end of BD.

Toyota is a recent example, they used to be the name in quality manufacturing untill they got too big, and the need to keep the stock holders happy persuaded them to not recall known defective products for over a year. (I know this is an imperfect example as the Toyota scandal is blown out of proportion by US politics/lobyists/media to bolster the failing US auto industry. Didn't the US make the drivable bomb, the Chevy Pinto which stockholder interest also led to a delayed recall?) This is scary shit and I hope this does not start a trend for other manufacturers.
 mushroom
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 2010-05-18
BD, the new North Face.

This is the natural cycle. Not long before reports of seams busting, horrible customer service, and favorability with sorority girls starts hitting the air waves.

Luckily there will be other small companies dishing out elite gear, run by people in boots and fleece not suits, to fill the demands of truly dedicated outdoor enthusiasts: those who demand performance not the new cool color.

If its publicly traded what keeps any old corporate asshole from purchasing a majority share and trying to develop a name brand?
 eastvillage
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 2010-05-18
Wall Street scum have just bought out BD. It's over.
 bstetson
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 2010-05-21
BD stuff was already on the China path anyways, no surprise there. Too bad.
 anthonymason
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 2010-06-06
Is it not the American dream to start a small business and suceed? I would say yes, but when it comes to my safety gear I buy it from companies that have a solid rep, and from countries who make rules and implement safety regulations for thier products as well for thier employees.
This being said, I will still buy products made in China, Taiwan, or any other backwater 3rd world country, I will not be buying safety related products from them. Imagine a buying a carabiner made from forced labor, hmmm not good karma, kinda like Omega does here in the US with prison labor?
I don't have any answers but Fish, Dmm, Petzl, Hilti, Yates, are just a few companies that I will continue to support with my greenbacks.
 anykineclimb
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 2010-06-10
Omega used to use volunteers in the prison and pay them full wages. a lot of their employees are former inmates that kept the job after serving their sentance.
 KevinHHogan
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 2010-07-06
BD manufactures climbing gear and has for years. I'm sure they are aware that we all put our lives worth of faith in them. Part of what sells their product is the fact that climbers trust them to manufacture quality gear. Without that trust they would sell lots less gear (as per all comments above). This would not be in the best interest of a public or private company.

We are likely to see changes in this company in the near future, however I would like to think that a drop in quality would not be one.

Also how about buying a stock or two in the company. If it's public that means we all have a say.

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