By Jacquie McNish
Fairfax Financial Holdings Ltd. and Sagard Capital Partners have agreed to make a joint bid to acquire Performance Sports Group Ltd. for more than $550 million as the sports equipment maker considers a plan to auction itself under bankruptcy court protection, one person familiar with the plans said.
Performance Sports is preparing to file for protection from its creditors as early as Monday under chapter 11 in the United States and a similar court process in Canada, the person said.
The Exeter, N.H., company was unable to win an extension from its lenders on a deadline Friday to file its overdue audited annual financial statements. The missed deadline puts the company at risk of defaulting on some debts.
As always, the deal could fall apart. There is no guarantee that Performance Sports will file for bankruptcy protection or that its lenders will support a sale of the struggling company's business.
Fairfax, Sagard and Toronto-based Brookfield Asset Management said last week they were considering a possible play for Performance Sports, which dominates the North American sports market with such brands as Bauer hockey gear and Easton baseball equipment.
Brookfield remains interested in supporting the Fairfax and Sagard bid, the person said, but hasn't yet decided whether to join the takeover bid or lend money through a so-called debtor-in-possession loan.
Such financing would allow Performance Sports to continue operating without interruption, pending a court-supervised auction process. Proposed bankruptcy buyouts are typically tested at auction to ensure creditors receive the highest recovery on what they're owed.
Brookfield and Sagard together own a 30% stake in the company.
As of April, Performance Sports owed $330.5 million to term lenders and $119. 2 million on an asset-based loan.
Although Performance Sports has a large market share in each of the hockey, baseball, lacrosse and roller hockey sectors for which it makes skates, gloves, bats and other equipment, the company has struggled in the last two years with debts it shouldered to acquire Easton's baseball and softball business for $330 million in 2014.
Since the acquisition, the company's baseball division has been beset with product problems and disappointing sales, triggered in part by a spate of bankruptcy filings by retail sports-equipment chains that stock its goods. The bankruptcy filing and subsequent liquidation of Sports Authority Holdings Inc. in March triggered a $90 million loss of Performance Sports inventory, according to a person familiar with the matter.
Performance Sports is listed on the New York Stock Exchange and Toronto Stock Exchange. In the last year the company's stock has dropped more than 66%.
Shortly after the company announced in August that it was unable to file its annual results because of an internal investigation, it revealed it is under investigation by the U.S. Securities and Exchange Commission and a Canadian securities regulator.
--Lillian Rizzo contributed to this article.
Write to Jacquie McNish at Jacquie.McNish@wsj.com
(END) Dow Jones Newswires
October 30, 2016 17:57 ET (21:57 GMT)
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