Great American Outdoors/Sportsman’s Warehouse: FTC, State AGs Express Significant Concerns With Retailer Tie-up

Published on Oct 27, 2021

The FTC and state attorneys general have expressed significant concerns to Great American Outdoors Group and Sportsman’s Warehouse (SPWH) representatives that the retailers’ proposed $785 million merger would harm competition in multiple states, sources familiar with the matter said.

The communications included meetings last month between the companies and individual FTC commissioners. Those meetings typically occur only after FTC staff has recommended the commission authorize a lawsuit to block a transaction, attorneys said.

The onus is now on the companies to propose a settlement that would seek to address the enforcers’ concerns, although the path to any potential settlement is far from certain, the sources said.

The proposed deal would combine Great American Outdoors, which owns Bass Pro Shops and Cabela’s, with Sportsman’s Warehouse, which operates 112 stores across 27 states. Both retailers sell a variety of outdoor sports items, including firearms, ammunition, camping, fishing, footwear and apparel.

The merging parties have meaningful geographic overlaps: At least 20 Sportsman’s Warehouse stores in 14 different states are within 10 miles of a Bass Pro Shops or Cabela’s, according to Capitol Forum analysis of location data.

Merging retailers often address antitrust concerns by agreeing to divest some overlap stores. But the FTC’s willingness to accept those fixes might have diminished under Chair Lina Khan, who has said that divestitures sometimes aren’t sufficient to remedy anticompetitive mergers, and that the commission should therefore “more frequently consider opposing problematic deals outright.”

There’s also no guarantee that Great American would pursue a divestiture proposal; per the merger agreement, the company isn’t obligated to divest stores, or accept any other form of structural relief, if necessary to secure FTC signoff.

Great American, however, must pay Sportsman’s Warehouse a reverse breakup fee of $55 million if the deal fails to secure antitrust clearance. That fee represents 7% of the deal’s value, and could give Great American an incentive to pursue a structural remedy, especially in light of outdoor sports retailers’ broader overperformance in recent months.

The companies announced their deal on December 21, and each received second requests on February 5.

But time for the deal is now running short—the merger agreement’s initial end date was September 17, although that date was automatically extended an additional 90 days because of the companies’ failure to win FTC signoff by that time.

An FTC spokesperson declined to comment. Spokespeople for Sportsman’s Warehouse and Great American Outdoors’ Bass Pro Shops didn’t respond to requests for comment.