Boot Barn Acquires Sheplers

Boot Barn Acquires Sheplers

Boot Barn Holdings, Inc. entered into a definitive agreement to acquire Sheplers, Inc., a 116-year old western lifestyle company with 25 retail locations across the United States and an e-commerce business, for a purchase price of $147 million in cash. For the twelve months ended March 28, 2015, Sheplers had net sales of approximately $157 million, which included $66 million of e-commerce sales, and Adjusted EBITDA of $14.9 million.

The Sheplers acquisition represents a significant step forward for Boot Barn’s omni-channel strategy, growing Boot Barn’s e-commerce penetration from 4% to 15%, based on the twelve months ending March 28, 2015. The addition of Sheplers’ industry leading e-commerce platform provides opportunities to create a dual brand online offering, leverage Sheplers’ domestic and international customer traffic, and create operating efficiencies across the combined online businesses. By rebranding the Sheplers stores to the Boot Barn banner, consistent with the strategies of its prior two acquisitions, Boot Barn will enhance its store footprint by adding eight new retail markets and build its position in Texas and Colorado. The businesses are highly complementary, with a similar western lifestyle focus, customer base, and store experience, which will allow Boot Barn to extend key merchandise categories and brands across the chain and access a combined database of more than five million customers.

The acquisition is expected to generate $6 million to $8 million of annual synergies and be immediately accretive to earnings, excluding estimated one-time transaction and integration expenses of $14 million, and approximately 10% accretive post integration, which is expected to be completed in calendar year 2016. Sales synergies are expected from expanded assortments, enhanced marketing activities, including rollout of Boot Barn’s B Rewarded loyalty program, and transfer of digital best practices across the e-commerce businesses. Margin synergies are expected to be achieved through scale purchasing, increased private brands penetration, and vendor direct and container-load sourcing. Cost savings are expected from consolidation of select corporate functions and efficiencies in e-commerce distribution.

Jim Conroy, chief executive officer of Boot Barn, stated, “The acquisition of Sheplers enhances Boot Barn’s position as the largest, fastest-growing western and work chain in the United States and creates the leading omni-channel business in the industry. We have great respect for Bob Myers and his management team and the focus they have had on building the retail and e-commerce businesses. Sheplers’ commitment to the industry and to superb customer service aligns well with Boot Barn’s philosophy of providing excellent customer service and offering a wide selection of merchandise. I would also like to acknowledge the ongoing efforts of the entire Boot Barn team as we continue to grow our business organically while looking forward to integrating the Sheplers business.”

Bob Myers, chief executive officer of Sheplers, commented, “Our ability to grow the largest online business in the industry started with building upon our loyal customer base from our long-standing catalog format. Joining the Boot Barn family will allow Sheplers to provide value to a larger customer base through both in-store and online channels and provide more opportunities for many of our associates both in the field and in our corporate office.”

The transaction has been approved by boards of directors of both companies, as well as the required majority of Shepler’s stockholders, and is expected to close by the week of June 29, 2015, subject to customary closing conditions. The Company expects to finance the acquisition with third party debt.