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Rock Climbing : Comments

Comments by sosure (3)


Article: Black Diamond Merger
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.



Article: Black Diamond Merger
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.


Article: Black Diamond Merger Followup
A somewhat less demure version of Kanders:

http://videosift.com/video/Colbert-Report-8-2-10-Alpha-Dog-David-H-Brooks