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interesting piece of mtb news

ire

Turbo Monkey
Aug 6, 2007
6,199
4
Wow, Compass Diversified Holdings owns a wide range of companies (hence the Diversified I guess).
 

daisycutter

Turbo Monkey
Apr 8, 2006
1,516
42
New York City
fox can make its products in usa. THey are going to have to move to asia because their products are already the most expensiveon the market.
 

A.P

Monkey
Nov 21, 2005
423
0
boston
Dam that compnay is like strictly Corporate America dude. Hopefully guys at Fox won't be working in shirt/ties.
Shirts and ties might be a stretch. Maybe to start with, the people who answer the phone can limit the amount of pot they smoke during their shift.


dude...wait...what?
 

jonKranked

Press Button, Receive Stupid
Nov 10, 2005
56,297
5,078
media blackout
fox can make its products in usa. THey are going to have to move to asia because their products are already the most expensiveon the market.
Their products are the most expensive because they are (arguably) the best out there. There are rear shocks that are more expensive than Fox. Besides, its not like they are leaps and bounds more expensive than their competitors. If you want a high performance, premium product, you have to be willing to pay a premium price. End of story. I don't foresee Fox moving production overseas anytime soon, if ever. There are still companies and consumers who take pride in manufacturing/purchasing American made products.

Also, I don't think that Fox produces products in large enough quantities for them to have any significant benefit from overseas production. Not surprisingly, many consumers perceive quality based on origin of manufacturing (and are therefore more easily convinced to pay a premium price for something domestically produced).
 

Transcend

My Nuts Are Flat
Apr 18, 2002
18,045
0
Towing the party line.
They acquired the company, that is a little more than just financial backing only.
Nope. They purchased "a majority interest". They did not acquire the company completely according to the Fox Press Release.

"Bob Fox will retain a significant ownership in FOX - an ownership now shared with senior managers"
 

jonKranked

Press Button, Receive Stupid
Nov 10, 2005
56,297
5,078
media blackout
IINM, generally when a holding company acquires another company (like Fox) its for one of 2 reasons... its to fund a significant expansion, or the company is not doing well financially and needs to get back on track (for any of a number of reasons).

Personally I hope its the first reason. Oh the rumors!
 

ekozy39

Monkey
Apr 27, 2005
312
0
Nope. They purchased "a majority interest". They did not acquire the company completely. Not according to the Fox Press Release.

"Bob Fox will retain a significant ownership in FOX - an ownership now shared with senior managers"
The Compass Co. is using word "acquired" not me..

I agree they did not purchase it completely, but 51% or more (majority) means the own it, and for the most part control the co.

From the release it sounds like they acquired 76%.

http://biz.yahoo.com/prnews/080107/nym058.html?.v=101

Doesn't matter to me either way, but that is a lot of money..They valued the co, and $85M!
 

Transcend

My Nuts Are Flat
Apr 18, 2002
18,045
0
Towing the party line.
According to Fox's PR, they have been shopping for some backing for awhile and are quite stable financially. My guess is that it's time for an expansion.

Watsonville, CA, January 7 - Fox Factory, Inc. (D/B/A FOX Racing Shox) announced today that on January 4, 2008 it consummated a
transaction in which Compass Diversified Holdings (“CODI”) purchased a majority interest in FOX.

Commenting on the transaction, company founder Bob Fox, who will remain Chief Executive Officer, said “For over thirty years
Fox Racing Shox has been devoted to fulfilling the performance needs of our customers. Over the last several years FOX has experienced
unprecedented growth, and we now look forward to being partnered with Compass for the next chapter in our Company’s history.

Being a successful, healthy company, FOX had the luxury of being able to carefully search out and select the best partner for this
transition. The financial strength and resources Compass provides will enable FOX to continue our strong growth and leadership in all of
our markets. Importantly, the Compass vision provides a transition that will be seamless and virtually invisible to all concerned – including
customers, vendors, and employees.”

Bob Fox will retain significant ownership in FOX - an ownership now shared with other senior managers. “It’s been a wonderful and
exhilarating ride to see the company I started in my friend’s garage grow to sales of over $100-million. I am proud of what we’ve done
so far and know FOX will be a stronger company going forward than I alone had the resources to provide for,” he stated.

Joe Massoud, CODI’s Chief Executive Officer, commented “FOX is a strong addition to CODI. This company possesses the critical
characteristics we look for in all of our businesses, including market leadership and proven management. Bob Fox and the Company’s
senior management team have driven growth by providing innovative suspension products for over three decades and we look forward
to working with them to continue and accelerate this growth.”

On a personal note, Bob Fox added: “I particularly look forward to the freedom this will provide me to again devote much of my time
and energy doing the things – design, engineering, and innovation – that I love the most. A rich backlog of exciting, innovative concepts
have been building up over the last few years, and I can hardly wait to start working on them with our engineering team.”

Since 1974 FOX Racing Shox has designed and manufactured the finest suspension products for Motorcycles, Mountain Bikes, ATV’s,
Snowmobiles and Off-Road racing vehicles. World Headquarters are in Santa Cruz County, CA with its Off-Road Division in Santee, CA.
FOX Racing Shox distributes its products in more than 40 countries.
 

ekozy39

Monkey
Apr 27, 2005
312
0
According to Fox's PR, they have been shopping for some backing for awhile and are quite stable financially. My guess is that it's time for an expansion.
You really believe the spin Fox's PR team is putting on it?

Compass is a public co. The truth will come out in the wash..The SEC filings will say it all.
If it is for expansion good for them..
 

Transcend

My Nuts Are Flat
Apr 18, 2002
18,045
0
Towing the party line.
You really believe the spin Fox's PR team is putting on it?

Compass is a public co. The truth will come out in the wash..The SEC filings will say it all.
If it is for expansion good for them..
Nor particularly, but I deal with them enough for a variety of things to know they aren't exactly in dire straits. The purse strings haven't been pulled tight.
 

jbogner

Monkey
May 8, 2006
315
0
Fort Collins, CO
Compass's website offers a different take:

-----

As founder of Fox, and the sole owner for over 30 years, I am now very excited about this transition of ownership to Compass. The financial strength and resources Compass provides will enable Fox to continue its strong growth and leadership in all its markets. It will also enable us to aggressively pursue new projects and opportunities. I will continue as President and CEO and will maintain a significant financial interest. On a personal note, I am excited about the opportunity this provides me to focus more of my time and energy doing the design and engineering work, the part of the business I love the most. As a successful, healthy company, Fox had the luxury of looking for and selecting the best partner for this transaction, we chose Compass."

Bob Fox, President and CEO
Fox Racing Shox

-----

A significant financial interest is clearly not a "majority stake." However, it does seem like Compass' experience with specialized tech manufacturing businesses could be very good for Fox in the long run.
 

ekozy39

Monkey
Apr 27, 2005
312
0
Compass's website offers a different take:


-----

A significant financial interest is clearly not a "majority stake." However, it does seem like Compass' experience with specialized tech manufacturing businesses could be very good for Fox in the long run.
According the public release it sounds like 76/24 with Compass owning majority..
IMO, this is a business move to strengthen Compass position as a public co. The have to acquire companies to grow, and they have stockholders to answer too, so if there wasn't an upside to this ($$$$) they wouldn't have done it.
 

Transcend

My Nuts Are Flat
Apr 18, 2002
18,045
0
Towing the party line.
A significant financial interest is clearly not a "majority stake." However, it does seem like Compass' experience with specialized tech manufacturing businesses could be very good for Fox in the long run.
According to Compass' own press release, they acquired 76%, with 24% remaining with bob Fox and his senior management.

edit: Beaten like a red headed stepchild

they have stockholders to answer too, so if there wasn't an upside to this ($$$$) they wouldn't have done it.
Exactly.
 

jbogner

Monkey
May 8, 2006
315
0
Fort Collins, CO
It only looks positive to me. An investment group with successful niche manufacturing companies, and large capital for Fox to take on the vertical integration of their competitors (Sram, Hayes group). The real question is, who will Fox acquire in their own quest for expansion and vertical integration? At the very least I'd expect them to develop suspension products that hit more of the market than their current high-end-only offerings.
 

TWeerts

Monkey
Jan 7, 2007
473
0
The Area Bay
i see it as a good thing, with the other companies in the group, they will make relationships with these and other companies, and will have access to new materials such as metals and plastics(lets hope it doesnt come to that) but they will be able to develop their product even further.
 

Rover Nick

Monkey
Oct 17, 2006
280
0
Here is the PR sent out fomr Compass... http://codi.client.shareholder.com/releasedetail.cfm?ReleaseID=284895

WESTPORT, Conn., Jan 07, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Compass Diversified Holdings (Nasdaq: CODI), Compass Group Diversified Holdings LLC and its subsidiaries (collectively, "CODI") announced today that on January 4, 2008, CODI simultaneously entered into a definitive agreement to acquire and consummated the acquisition of Fox Factory, Inc. ("Fox").

Founded in 1974 and headquartered in Watsonville, California, Fox is a designer, manufacturer and marketer of high end suspension products for mountain bikes, all terrain vehicles, snowmobiles and other off-road vehicles. Fox both acts as a tier one supplier to leading action sport original equipment manufacturers and provides aftermarket products to retailers and distributors. Fox's products are recognized as the industry's performance leaders by retailers and end-users alike.

Under the terms of the transaction, CODI's acquisition of Fox is based on a total enterprise value of $85.0 million, representing approximately 7.5 times Fox's estimated Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") for 2007, before taking into account the positive cash flow impact of the tax asset step-up pursuant to which CODI will be acquiring Fox. Fox management will invest in the transaction alongside CODI resulting in an initial minority ownership of approximately 24%.
Regarding the acquisition, I. Joseph Massoud, CODI's CEO, said, "Fox is a strong addition to our current group of subsidiaries. This company possesses the critical characteristics we look for in all of our businesses, including market leadership in a niche industry, strong cash flow and proven management. The Fox brand name is highly recognized and well respected globally in its industry, and Fox's products reflect the company's culture of continual design innovation and superior performance. Robert Fox and the company's senior management team, who will continue to manage the business under our ownership, have driven growth by providing innovative suspension products for over three decades and we look forward to working with them to continue and accelerate this growth."

Upon closing, this acquisition will be accretive to our shareholders and increase our cash flow available for distribution. Our ability to consummate this transaction was facilitated to a great extent by our financing structure, under which we will fund this acquisition through excess cash on hand and our newly expanded credit facility at the CODI level," concluded Mr. Massoud.

Additional information on the acquisition will be available on the Company's current report on Form 8-K that will be filed with the Securities and Exchange Commission on or before January 8, 2008.

About Compass Diversified Holdings ("CODI")

CODI was formed to acquire and manage a group of middle market businesses that are headquartered in North America. CODI provides public investors with an opportunity to participate in the ownership and growth of companies which have historically been owned by private equity firms or wealthy individuals or families. CODI's disciplined approach to its target market provides opportunities to methodically purchase attractive businesses at values that are accretive to its shareholders. For sellers of businesses, CODI's unique structure allows CODI to acquire businesses efficiently with no financing contingencies and, following acquisition, to provide its companies with substantial access to growth capital.

Upon acquisition, CODI works with the executive teams of its subsidiary companies to identify and capitalize on opportunities to grow those companies' earnings and cash flows. These cash flows support distributions to CODI shareholders, which are intended to be steady and growing over the long term.
I've italisized what I think is important as a summary.

It sounds like Bob is still gonna be in some amount of control. And it sounds like Compass isn't out to change the companies, and more improve. Of course this is all after the PR spin.
 

Nick

My name is Nick
Sep 21, 2001
14,987
3,352
behind you, don't wait up.
Fox obviously has their suspension products dialed in, and getting better all the time. That said, a huge influx of money can do any company good ... ask Rock Shox.

Plus, "Fox" the brand is a lot bigger than suspension. Compass probably looked at it as a safe investment with a good probability for returns.


edit: yea, what they said. I guess I should read the whole post before posting!
 

ekozy39

Monkey
Apr 27, 2005
312
0
Don't forget that they make products outside of the bicycle industry. I would guess any expansion would take place in the powersport industry.
I agree. Consider at most you'll have at most $2500 of suspension on your bike, but a Trophy Truck could easily get be anywhere from $40-60k for a set full Fox setup.
 

slothy

Monkey
Sep 21, 2007
259
0
Ireland
Lots of reasons there for somebody wanting to buy FOX, but I'd say the guy Bob Fox, just wanted to release some equity in the business , either to go and spend and enjoy, put into a pension, or diversify invest in some other businesses....

He as an entrepreneur has done an amazing job... probably wnats to do something else
 

jbogner

Monkey
May 8, 2006
315
0
Fort Collins, CO
Does Fox have OEM penetration in the motorsports markets like they do in the bike market? I'm not familiar with those markets, but it does seem like Fox puts a lot of Fox-branded shocks on mountain bikes from manufacturers around the world, while if I go into a Honda or Yamaha dealer to buy an ATV or moto, I'm not going to get Fox suspension on it OEM.

From what I've seen in the bike industry, and how many companies year-in, year-out spec Fox suspension across their product lines, they have to be doing at least $15-20 million a year in bike products. That's a decent percentage of their yearly $100 million in revenue.
 

MDJ

Monkey
Dec 15, 2005
670
0
San Jose, CA
I also don't think they are a $100M a year. The report said they were valued at $85M which equalled 7.5x earnings. So they are about $11 M per year..
You lost me on this one. They are over $100M in revenue a year, per Bob in the Fox press release.

Revenue and valuation aren't tied together. Your earnings calc is right though.