Sagard Capital Partners, a subsidiary of global conglomerate Power Corporation of Canada (TSX: POW) which has a market capitalization of CAD $12.76 billion (USD $9.82 billion), and is the largest shareholder in financially distressed Performance Sports Group Ltd. (NYSE/TSX: PSG) with a stake of roughly 17%, said it may consider or propose a restructuring, an acquisition of indebtedness or of additional equity securities, or the acquisition of all of PSG. In light of PSG’s recent public announcement that it has retained Centerview Partners LLC to assist “in the review and evaluation of strategic alternatives,” and the postponement of PSG’s 2016 annual meeting of shareholders and 10-K annual report filing, Sagard Capital and PSG confirmed they ended their “standstill” agreement and previously announced “shareholder nomination,” delaying the appointment of Sagard’s executive chairman Paul Desmarais III to the board of PSG. The move quietly sets the stage for the resourceful Desmarais family to potentially save and take over PSG, or assume a more significant role in the company, which has its roots in Canada. “The Desmarais family controls Power Corp. of Canada, whose interests include stakes in giant companies on three continents. The clan is sometimes described as the closest thing Canada has to business royalty, its power amplified by close ties to presidents, prime ministers, bureaucrats and business titans all over the world,” says The Wall Street Journal. “Their grandfather built it. Their fathers expanded it. Now the fate of one of Canada’s biggest corporate empires is in the hands of two 34-year-old cousins who are largely untested in the business world,” namely Paul Desmarais III, and Olivier Desmarais. The Desmarais family owns Domaine Laforest, a 77 square kilometers estate at Sagard, in Quebec’s pine-forested Charlevoix region, which spawned the name of their eponymous private equity firm Sagard Capital. In 2013, the family patriarch Paul Desmarais died at the estate, which has hosted French President Nicholas Sarkozy, U.S. President Bill Clinton, and both Presidents Bush. According to the National Post, he was the richest man in Quebec, and among the 10 richest in Canada.
“In the remote hills of the Charlevoix region, where the Sauguenay meets the St. Lawrence River two hours from Quebec City, lies one of Canada’s best but least known courses. Built exclusively for the family of Canadian business legend, Paul Desmarais, the course lays out magnificently on a gorgeous and compelling landscape. Maintained to a standard rivalling Augusta National, Domaine Laforest is truly one of golf’s hidden gems.” –Tom McBroom, award-winning Canadian golf course architect.Power Corporation had over CAD $1.36 trillion (USD $1.05 trillion) in assets under management at December 31, 2015. Among its multiple other holdings, through its Square Victoria Communications subsidiary which controls Gesca, Power Corporation holds La Presse, Canada’s French-language news medium of record. PSG shares jumped over 31% on September 2, closing at USD $3.56 on the New York Stock Exchange, which brought its market capitalization to USD $162.22 million, and its enterprise value to USD $625.16 million. In its most recent 10-Q filing, PSG reported $587.3 million in total debt, and $2.58 million in cash on hand, for its fiscal 2016 third quarter ending on February 28, 2016. Quarterly revenues totaled $126.1 million, declining 8.5%, and Adjusted EBITDA was a loss of $11.0 million, compared year-over-year to Adjusted EBITDA of $14.6 million. Net loss totaled $188.1 million, compared y-o-y to a net loss of $12.5 million. PSG said earlier in the week it retained investment banking firm Centerview Partners LLC to explore strategic alternatives and advise on financial restructuring options, as its creditors granted it a 60-day extension to file its 10-K report. PSG was also granted continued access to borrowings under its revolving credit facility, which provides it with liquidity to fund operations. Bank of America NA is acting as administrative agent and collateral agent for the lenders. Exeter, New Hampshire-based PSG is a leading developer and manufacturer of high performance sports equipment and apparel. It is the global leader in hockey with the strongest and most recognized brand, and a leader in North America in baseball and softball. PSG’s products are marketed under the Bauer, Mission, Maverik, Cascade, Inaria, Combat and Easton brand names and are distributed throughout the world. The company, which has experienced multiple leadership changes in recent years, is said to be conducting an internal investigation. PSG is also the subject of investigations by the SEC and Canadian authorities, and is a defendant in a consolidated class action suit in New York, according to NHBR. The plaintiffs reportedly allege that PSG pressured retailers into ordering merchandise to artificially inflate revenue and mislead investors. In June 2016, the company appointed Harlan Kent as its new chief executive and as a member of its board of directors. Kent is the former president and CEO of Yankee Candle Inc. In January 2016, PSG acquired the Easton Hockey business of Easton Hockey Holdings Inc. from New York-based private equity firm Chartwell Investments, which had previously acquired Easton in 2014 from BRG Sports, reportedly for roughly $20 million with little or no money down. Around the same time, PSG’s former chairman, Graeme Roustan, who left the company’s board in 2012, filed a lawsuit in Canada against accounting firm Grant Thornton for breach of contract and defamation in connection with a battle over the retailer’s strategy. Roustan, who as of December 2015 held a 1.39% stake in PSG, had been seeking to take PSG private during the past few years. He’s said to have recently hired investment banks Jefferies Group LLC and Canaccord Genuity to explore a possible bid for PSG, according to Reuters. PSG was owned for about a decade by U.S. sporting goods company Nike Inc. before being sold to private equity firm Kohlberg & Co in 2008. It went public on the Toronto Stock Exchange in 2011. PSG, formerly known as Nike Bauer from 2005 to 2009, and subsequently Bauer Performance Sports Ltd., changed its name to Performance Sports Group in June 2014 as it was listed on the New York Stock Exchange. Founded in Kitchener, Ontario, Canada in 1927 as the Bauer company by the Freibauer family, owners of Western Shoe Company, PSG’s predecessor developed the first skate with a blade attached to the boot, an innovation credited with changing the game of hockey. POWER CORPORATION HISTORY POWER CORPORATION SNAPSHOT Infographics, courtesy Power Corporation of Canada. Photo (above): Paul Desmarais III, Chairman of Sagard Capital Partners. (La Presse/Edouard Plante-Fréchette)]]>