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Sportmart Parent Seeks Rival

Gart Aims to Top Previous Bid for Sports Authority


Seeking to merge the nation's two largest sporting goods chains, the parent of Sportmart stores on Thursday offered $444 million for a majority stake in larger rival Sports Authority.

Gart Sports Co., a Denver-based company controlled by Los Angeles investor Leonard Green, said it would pay about $20 a share in cash for 70% of the stock of Sports Authority. Gart seeks to top a competing stock-swap offer from Venator Group, operator of the Foot Locker chain.

At current stock prices, the value of the Venator offer is $16.70 a share, or $524 million, for all of Sports Authority stock.

Fort Lauderdale, Fla.-based Sports Authority did not immediately respond to the new offer. Venator declined to comment on Gart's bid, but analysts suggested that the move could spark a bidding war for Sports Authority.

Green's effort to consolidate the sporting goods retail sector parallels his acquisitions in the drugstore industry. Green bought Thrifty Drugs in 1992, later merged it with PayLess Drug Stores and in 1996 sold that combined chain to Rite Aid.

If Gart acquires Sports Authority, Green will have stakes in the three biggest sporting goods chains in Southern California. Big 5 Sporting Goods, now the region's largest chain, is 35% owned by Leonard Green & Partners, which owns 60% of Gart. Green sold a controlling interest in Big 5 in October, one month after Gart acquired Sportmart, to avoid a conflict of interest.

Gart, with 122 stores in 16 states, primarily in the Rocky Mountain region, has no stores in California. However, Sportmart's 14 stores in Southern California--out of 64 stores nationwide--compete against Sports Authority, which has 12 of its 189 U.S. stores in the Southland.

"There are tremendous synergies and cost savings in our deal," said Jonathan Sokoloff, a partner at Leonard Green & Partners. "We believe the [sporting goods] industry should consolidate further, and there would be little geographic overlap in a Gart-Sports Authority combination."

Sports Authority has not yet scheduled a shareholder vote on the Venator bid it tentatively accepted May 7. Investors have given thumbs down to the Venator bid, driving Venator's stock price down 12% and Sport Authority's down 16% before Gart's announcement. That reaction encouraged Gart to make its own bid, Sokoloff said.

Sports Authority and Gart's chains are full-line sporting goods merchandisers that generally operate from free-standing stores. New York-based Venator, formerly known as Woolworth Corp., primarily sells athletic shoes at its 2,000 Foot Lockers, mostly in malls.

Sports Authority can drop its deal with Venator in favor of a better offer. Gart may be more appealing because Sports Authority could enhance its buying power and get better prices from suppliers, analysts said.

Shares of all three companies rose. On the New York Stock Exchange, Venator shares gained 69 cents to close at $20.88 and Sports Authority rose $1.38 to $16.50. Gart jumped $2.25 to $14.75 on Nasdaq.


Sporting Offer

Sports Authority shares declined steadily after it accepted a May 7 buyout offer from Venator Group. Through Wednesday, shares had fallen 16%. Gart Sports' offer to buy 70% of the retailer for $20 a share Thursday helped boost Sports Authority stock $1.38 to close at $16.50.

Thursday: $16.50

Source: Bloomberg News

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