Dick’s Sporting Goods Inc (DKS.N) is holding early-stage conversations with a handful of buyout firms about going private, according to people familiar with the matter.
There is no formal sale process for the sporting goods retailer, these people said on Wednesday, and the Coraopolis, Pennsylvania-based company could still decide not to go forward with a deal if the preliminary talks do not pan out.
Shares of Dick’s Sporting Goods rose as much as 13.5 percent to $55.88 on the news of a possible sale, giving it a market value of roughly $6.7 billion. They were up 10.4 percent at $54.35 in afternoon trading.
A representative for Dick’s Sporting Goods could not be reached for comment. The sources requested anonymity because the discussions are private.
Analysts have pegged Dick’s Sporting Goods as a potential buyout target, in part because its share performance has lagged peers. At Tuesday’s close, the stock had fallen 15 percent in the last 12 months, compared with a 6 percent rise for the Standard & Poor’s 500 Sector Discretionary index.
The recent $8.7 billion leveraged buyout of pet supply retailer PetSmart Inc (PETM.O) by private equity firm BC Partners may also signal renewed appetite from buyout groups for brick-and-mortar retailers, analysts have said.
Flush with cash, private equity firms are increasingly looking for large deals in consumer products and retailing even though tighter leveraged lending guidelines are limiting the amount of debt placed on buyouts.
Besides Dick’s, analysts have also mentioned consumer electronics chain Best Buy Co Inc (BBY.N) and home goods retailer Pier 1 Imports Inc (PIR.N) as potential buyout candidates in the retail industry. Representatives for the two companies could not immediately be reached for comment.
Founded in 1948 by Dick Stack at the age of 18, Dick’s Sporting Goods offers sports equipment, apparel, footwear and accessories at more than 597 locations throughout the United States.
The company’s net sales for the third quarter ended Nov. 1 rose 9 percent to $1.5 billion from a year earlier, while net income fell to $49.2 million from $50.0 million.
(Reporting by Greg Roumeliotis and Olivia Oran in New York; Editing by Soyoung Kim and Lisa Von Ahn)
Photo courtesy of Reuters