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NoBadMojo
08-13-2007, 05:49 AM
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Prince Sold to Private Equity Firm Nautic Partners and Prince Management

Prince announced this morning that Nautic Partners, LLC has joined with the Prince management team to acquire Prince Sports, Inc. from its existing shareholders.
Four years ago the Prince management team and an investment partner acquired Prince Sports, Inc. (the parent of the Prince and Ektelon racquet sports brands) from the Benetton Group. Late last year, the Company began looking for a new investment partner to support its growth and development plans.
Based in Providence, Rhode Island, Nautic Partners is a private equity firm focused on providing growth capital to middle market companies. According to Chris Crosby, Managing Director at Nautic Partners, “Prince is an iconic brand in racquet sports. The management team has done a terrific job rejuvenating that brand by combining product innovation with marketing and service. The whole organization is focused on broadening its footprint globally, and we are ready to support their quest to be #1 in the racquet sports industry.”


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Bud
08-13-2007, 08:37 AM
... As long as they keep making the POG... :D

danix
08-13-2007, 09:49 AM
It's a conspiracy! You must be on the Prince payroll!
You arranged for the sale of Prince only to put Becker Tennis in a better position!

Hey, you know someone's going to throw these around eventually :)

BreakPoint
08-13-2007, 11:02 AM
So all that's happened is that Prince went from being in the hands of one private equity firm to the hands of another private equity firm. No big deal. It would appear that it's Prince's management that's calling the shots anyway as they are also significant shareholders in the company, and it looks like that won't change. It looks like they just got a financial infusion from an investor. Now they can go out and sign more top pros.

christo
08-13-2007, 11:06 AM
Does Prince make a profit?

mark rodgers
08-13-2007, 01:38 PM
You have to admit that the recent resurgence of ATP doubles coupled with Prince landing the Bryans was a stroke of genius. Did you also see those short ad on Tennis Channel where some of the sponsored pros are talking about their Prince racquets? Personally, I've tried Prince but only those in the triple threat series. I never liked Prince but with current marketing and sponsored pros, I'm at least thinking about. I think a lot of people are getting reacquaited with Prince again.

SHUNGO
08-13-2007, 02:37 PM
So, this change of hands means that I will play better or worst?? :confused:

AlpineCadet
08-13-2007, 02:42 PM
You have to admit that the recent resurgence of ATP doubles coupled with Prince landing the Bryans was a stroke of genius. Did you also see those short ad on Tennis Channel where some of the sponsored pros are talking about their Prince racquets? Personally, I've tried Prince but only those in the triple threat series. I never liked Prince but with current marketing and sponsored pros, I'm at least thinking about. I think a lot of people are getting reacquaited with Prince again.

Prince should update their paint jobs, because they look a bit bland compared to the rest of the major brands.

counterpunchingrules
08-13-2007, 06:11 PM
either that or they should develop a technology that actually lets you feel something when you hit the ball

Morpheus
08-13-2007, 06:31 PM
So all that's happened is that Prince went from being in the hands of one private equity firm to the hands of another private equity firm. No big deal. It would appear that it's Prince's management that's calling the shots anyway as they are also significant shareholders in the company, and it looks like that won't change. It looks like they just got a financial infusion from an investor. Now they can go out and sign more top pros.

It depends on what the multiple was and how much leverage the new company has. If they are highly leveraged--and I'd be willing to bet they are given today's market premiums--cash may go disporportionately to debt paydown and their ability to spend on product development may suffer.

NoBadMojo
08-13-2007, 06:55 PM
It depends on what the multiple was and how much leverage the new company has. If they are highly leveraged--and I'd be willing to bet they are given today's market premiums--cash may go disporportionately to debt paydown and their ability to spend on product development may suffer.

I think the bottom line on things of this nature is disporportionately about the bottom line when ownership is by bean counters rather than people who actually care about the product the company sells. they dont care if it is garbage cans or tennis racquets they are peddling. these sorts of things often result in further reduction in quality to enhance margins.

Off topic but I recommended a sci-fi book to you a long time ago. did you read it? enjoy it? Altered Carbon by Richard K Morgan.

Also, have you read anything by John Twelve Hawks? he just published part two of a trilogy....the guy is totally off the grid, and nobody seems to know who he really is or has even actually seen him. I've read both of them and can recommend especially since you are Morpheus....this is a more reasonable and logical and kicked up 'matrix'. they really should make a movie out of this i think. website if interested --> http://www.randomhouse.com/features/johntwelvehawks/

Morpheus
08-13-2007, 07:02 PM
[QUOTE=NoBadMojo;1663444]I think the bottom line on things of this nature is disporportionately about the bottom line when ownership is by bean counters rather than people who actually care about the product the company sells. they dont care if it is garbage cans or tennis racquets they are peddling. these sorts of things often result in further reduction in quality to enhance margins.

Business is always about the bottom line, but private equity guys can really suck a company dry. They need a return and tend to look for an exit strategy in 3 to 5 years. This means boosting short term returns by starving the company and raising prices.

Off topic but I recommended a sci-fi book to you a long time ago. did you read it? enjoy it? Altered Carbon by Richard K Morgan.

Thanks for reminding me. I just ordered it off Amazon--had forgotten all about it.

Also, have you read anything by John Twelve Hawks?

Not yet. I'll look into it.

BreakPoint
08-13-2007, 07:29 PM
It depends on what the multiple was and how much leverage the new company has. If they are highly leveraged--and I'd be willing to bet they are given today's market premiums--cash may go disporportionately to debt paydown and their ability to spend on product development may suffer.
It doesn't sound like there is any leverage so there won't be any debt paydown. It doesn't sound like they borrowed any money so there's no debt from this transaction. They got someone to invest equity in the company. So the investors will only see a return when they sell the company since they are equity holders and not debt holders so no need for the company to service any new debt from this transaction.

goosala
08-13-2007, 07:31 PM
I don't care if they get handed around like a joint as long as they keep making the POG mid.

Ronaldo
08-13-2007, 07:32 PM
Prince finally found a winner w/O3 racquets.

anirut
08-13-2007, 07:41 PM
Business is always about the bottom line, but private equity guys can really suck a company dry. They need a return and tend to look for an exit strategy in 3 to 5 years. This means boosting short term returns by starving the company and raising prices.

Sounds very much like what the current Junta Government we're having here in Thailand is doing now ... they're just sucking the country dry, issuing a new constitution that will allow them to start a coup any time without being outlawed.

(sorry, a bit off topic.) ;)

NoBadMojo
08-13-2007, 08:11 PM
[quote=NoBadMojo;1663444]I think the bottom line on things of this nature is disporportionately about the bottom line when ownership is by bean counters rather than people who actually care about the product the company sells. they dont care if it is garbage cans or tennis racquets they are peddling. these sorts of things often result in further reduction in quality to enhance margins.

Business is always about the bottom line, but private equity guys can really suck a company dry. They need a return and tend to look for an exit strategy in 3 to 5 years. This means boosting short term returns by starving the company and raising prices.

Off topic but I recommended a sci-fi book to you a long time ago. did you read it? enjoy it? Altered Carbon by Richard K Morgan.

Thanks for reminding me. I just ordered it off Amazon--had forgotten all about it.

Also, have you read anything by John Twelve Hawks?

Not yet. I'll look into it.


you're welcome.

back on topic, there are many equity companies always looking to buy companies at distressed prices.....often they put some lipstick on the Pig then spin it off again making a nice buck. not saying prince is a pig and dont know if they were in desperation mode or were actually turning a decent profit...i just dont know, and dont wish to be like others around here proclaiming the demise of a Company merely because of a ownership/partnership change

BreakPoint
08-13-2007, 10:48 PM
AFAIK, Prince Sports will remain Prince Sports since the reason why this private equity firm invested in the company is due to the brand name as they stated - "Prince is an iconic brand in racquet sports. The management team has done a terrific job rejuvenating that brand......"

So no new company has formed and no old company has been terminated in this case, as the case was with Boris Becker Sports GmbH and Volkl Tennis GmbH.

Duzza
08-14-2007, 12:22 AM
For sale posts and messages are permitted in the For Sale forum only. Posts in other forums will be removed and may result in the user being banned. No for sale posting or commercial links in signatures or user profiles.

Thank you for your cooperation.

PimpMyGame
08-14-2007, 03:20 AM
It doesn't sound like there is any leverage so there won't be any debt paydown. It doesn't sound like they borrowed any money so there's no debt from this transaction. They got someone to invest equity in the company. So the investors will only see a return when they sell the company since they are equity holders and not debt holders so no need for the company to service any new debt from this transaction.

This deal will almost certainly be highly leveraged. Being part of a group which was acquired by a private equity firm nearly two years ago I can only endorse what Morpheus has already said. Basing returns on a multiple of EBITDA (profits) which I would suggest is between 7 and 10 their exit would be more like 5 years than 3.

The bad news is that PE firms have a set "equation" for increasing profits and hence the value of the business. This normally begins with employing cost-cutting consultants to go into a business and tell everyone where to cut back. Unfortunately this is where PE firms come unstuck, if they don't fully understand the business. This is also where a strong management is required to fight their corner and ensure no rash decisions are made on the back of comments from consultants who are trying to justify their fee.

The good news is that once the cost-cutting consultants have gone on their merry way, or even before, the PE firm will want the business to "sell like crazy". They will be open to ideas and strategies to increase market share, so take your pick - sign up more pros, different products, better quality, more product differentiation. They will also look for quick wins, so new lines using existing technology, or new pj's (as someone has already mentioned) would be favourite.

Looking further into Nautic's advisors, they have one very interesting guy on board, the CEO of Savage Sports, primarily a gun sports company. Maybe a buyout of Browning is on the cards in 1.5 - 2 years?

Further from that, I don't know enough about the Prince business to comment on whether R&D would be under threat. True, their O3 range looked like a life saver but these rackets seem to be in the "lov them or hate them" category.

Finally, if Prince want to increase market share they will have to do some serious work on getting Wilson die-hards to change allegiance. I think they would design rackets to compete directly with the likes of Head or Babolat.

Morpheus
08-14-2007, 04:07 AM
It doesn't sound like there is any leverage so there won't be any debt paydown. It doesn't sound like they borrowed any money so there's no debt from this transaction. They got someone to invest equity in the company. So the investors will only see a return when they sell the company (OR if they recapitlize the company) since they are equity holders and not debt holders so no need for the company to service any new debt from this transaction.

It is hard to tell given the scant info in the press release. However, it is more likely that there is new debt. My guess is that Prince re-levered the company and that this recap was designed to allow the original investors an opportunity to take their original investment plus off the table. It is possible, however, that they rolled it all back in, but hard to imagine. I certainly wouldn't do it that way. Multiples are at record highs and (until recently) money was widely available, and sometimes convenent free, so you see a lot of this sort of activity.

jackcrawford
08-14-2007, 04:33 AM
http://www.racquetsportsindustry.com/news/2007/08/nautic_partners_llc_and_manage.html Quote: George Napier, CEO of Prince, commented, “From the introduction of O3 Racquet Technology in 2005 to the recent launch of Aerotech Performance Apparel in July, our team has been committed to delivering game-changing performance racquet sports equipment for players and coaches worldwide. Along with the success we’ve had in the last few years comes the obligation of stepping things up and becoming an even better company. That generally means taking on new opportunities and it’s the scope of those opportunities which spurred us to look for additional investment. In the last few months, I have spent countless hours with my team and the Nautic senior leadership team, and am genuinely excited to be joining them. They have the expertise and financial strength to help us tap the major growth opportunities facing us and I am confident they will be great partners for years to come.”

Currently poised to break $100 million in sales by the end of its fiscal year, Prince’s recent global growth was led by solid performance in the company’s racquet category, due in large part to its award-winning line of O3 products. In January 2007, Prince launched O3 Speedport racquets – an extension of its already successful, patented Original O3 technology which transformed racquet design and performance and has quickly become a “must have” technology for players on tennis courts around the world. In addition, Prince’s footwear division contributed to the growth trend as its new M Series line expanded its distribution base. And a successful introduction of a new Synthetic Gut Multifilament string fueled additional growth and complemented the industry’s #1 selling string, Prince Synthetic Gut with Duraflex. End quote
The Speedport Red is a great frame, even 5.5 Granville loved it! Prince really righted the ship with the 03 and Speedport series. I also love their footwear.

Ronaldo
08-14-2007, 05:18 AM
Any idea what was paid for Prince? Benetton Group sold Prince for about $39 million in 2003.

PimpMyGame
08-14-2007, 05:37 AM
Well their sales are at a 10-year high so I think the price would have been substantially more than $39m, maybe even double that.

Morpheus
08-14-2007, 05:58 AM
Hard to believe Prince is so small. I had no idea.

NoBadMojo
08-14-2007, 06:08 AM
Hard to believe Prince is so small. I had no idea.

The tennis Industry in general is small, so therefore even the larger companies in the Industry are small relative to many other industries. Tennis racquets are fairly durable goods, therefore they must survive by making very large profits on tennis racquets and finding ways to get people to buy new racquets before the one(s) they have are worn out to create enough volume and sales velocity to survive.

Ronaldo
08-14-2007, 06:39 AM
The tennis Industry in general is small, so therefore even the larger companies in the Industry are small relative to many other industries. Tennis racquets are fairly durable goods, therefore they must survive by making very large profits on tennis racquets and finding ways to get people to buy new racquets before the one(s) they have are worn out to create enough volume and sales velocity to survive.

Believe tennis racquets are now only half of overall sales and supposedly, this is a low margin business. Prince had over $82 million in sales in 2003 when Bennetton sold the company. However, Prince had over $200 million in sales in 1994, even in 1982. http://www.fundinguniverse.com/company-histories/Prince-Sports-Group-Inc-Company-History.html

NoBadMojo
08-14-2007, 07:47 AM
Believe tennis racquets are now only half of overall sales and supposedly, this is a low margin business. Prince had over $82 million in sales in 2003 when Bennetton sold the company. However, Prince had over $200 million in sales in 1994, even in 1982. http://www.fundinguniverse.com/company-histories/Prince-Sports-Group-Inc-Company-History.html

Low margin for whom? Lower for the reseller likely, but not the manufacturer. it must be high margin for the manufacturer because the volume is low and there are lots of ancillary costs. low margin plus low volume and high overhead = OB.

Morpheus
08-14-2007, 09:11 AM
Low margin for whom? Lower for the reseller likely, but not the manufacturer. it must be high margin for the manufacturer because the volume is low and there are lots of ancillary costs. low margin plus low volume and high overhead = OB.

I suspect he means low margin as in low operating income not gross margin. SG&A must be very high for these types of companies.

BreakPoint
08-14-2007, 11:09 AM
This deal will almost certainly be highly leveraged. Being part of a group which was acquired by a private equity firm nearly two years ago I can only endorse what Morpheus has already said. Basing returns on a multiple of EBITDA (profits) which I would suggest is between 7 and 10 their exit would be more like 5 years than 3.

"Leverage" means borrowing money, like from a bank, as in a "leveraged buyout", so that you use the future earnings of the company to pay off the debt (including interest). This sounds like a straightforward equity investment by the PE firm in the company, not a loan. The PE firm are now part-owners in the company, along with the management. Both are shareholders and will only profit once those shares are sold again, hopefully at a higher valuation. (BTW, I worked at a private equity firm).

BreakPoint
08-14-2007, 11:21 AM
It is hard to tell given the scant info in the press release. However, it is more likely that there is new debt. My guess is that Prince re-levered the company and that this recap was designed to allow the original investors an opportunity to take their original investment plus off the table. It is possible, however, that they rolled it all back in, but hard to imagine. I certainly wouldn't do it that way. Multiples are at record highs and (until recently) money was widely available, and sometimes convenent free, so you see a lot of this sort of activity.
Why recapitalize by taking on any new debt? It sounds like the previous PE firm wanted to exit since the valuation of the company has gone way up since they first invested due to the success of Prince in the past few years, so they simply sold their stake in the company to another PE firm that was willing to pay the higher valuation. This way the previous PE firm walks away with a nice return on their investment and they're happy. The new PE firm can take on all the risks going forward that Prince will continue to grow and continue to increase its profits, and thereby, its valuation. It's possible that the management also sold some of their own shares to the new PE firm in this transaction at the current valuation so that they can take some money off the table and reward themselves with a nice profit for all their hard work in building and reviving the company over the past few years (the debacle with James Blake notwithstanding ;) ).

BreakPoint
08-14-2007, 11:29 AM
I suspect he means low margin as in low operating income not gross margin. SG&A must be very high for these types of companies.
The biggest expense has to be marketing. Look at how much Prince must pay just Sharapova for her "lifetime contract". Big names don't come cheap. Also, all the ads in magazines and commericals (like on The Tennis Channel), and sponsoring tournaments, players, etc. That's why net margins are so low.

BTW, the retailers do have high margins if they are able to sell at full MSRP, which most are not able to. Retailers (pro shops) also don't sell in high enough volumes that even with the high margins, they still don't make huge profits given their high overhead.

Steve Huff
08-15-2007, 10:00 PM
Shungo--better, of course.

louis netman
08-15-2007, 11:28 PM
I think the bottom line on things of this nature is disporportionately about the bottom line when ownership is by bean counters rather than people who actually care about the product the company sells. they dont care if it is garbage cans or tennis racquets they are peddling. these sorts of things often result in further reduction in quality to enhance margins.

Off topic but I recommended a sci-fi book to you a long time ago. did you read it? enjoy it? Altered Carbon by Richard K Morgan.

Also, have you read anything by John Twelve Hawks? he just published part two of a trilogy....the guy is totally off the grid, and nobody seems to know who he really is or has even actually seen him. I've read both of them and can recommend especially since you are Morpheus....this is a more reasonable and logical and kicked up 'matrix'. they really should make a movie out of this i think. website if interested --> http://www.randomhouse.com/features/johntwelvehawks/

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