MLB Partners with P.E. Firm to Acquire Rawlings

Rawlings

Seidler Equity Partners (private equity firm) and Major League Baseball (non-controlling interest) have acquired Rawlings – and subsidiaries Miken and Worth – for $395 million, from Newell Brands (NWL). The 131-year-old baseball equipment company has manufactured the league’s official game ball since 1977 and maintains the contract to supply the league with balls and batting helmets through 2021. MLB EVP for Strategy, Technology and Innovation Chris Marinak said the acquisition will give the league “even more input and direction on the production”, important with the league facing accusations that home run numbers have soared over the last 3 seasons because of “juiced baseballs.”

Howie Long-Short: Newell Brands acquired Rawlings as part of a $13 billion takeover of Jarden, back in 2013. That deal nearly doubled the St. Louis manufacturer in size ($11 billion in revenue over 1st 9 mo. of ’17 vs. $6 billion prior) but left it with $10 billion in debt, which explains why they’re shedding assets (see: Waddington Group for $2.3 billion) that don’t align with their 9 core consumer divisions (think: Sharpie pens to Crock-Pot cookware). NWL intends on using the sale’s proceeds (+/- $340 after taxes) to fund share buybacks and pay down debts.

Rawlings was considered the least valuable of the brands NWL wanted to unload. Deutsche Bank pegged the company at 8x EBITDA (+/- $360 million), so you can understand why President Michael Polk was “pleased with the agreement to sell Rawlings at an attractive multiple.” NWL shares are up +6% ($24.68 at Friday’s close) since news of the Rawlings deal broke, but remain down 20% YTD.

Fan Marino: Home run rates have unexpectedly soared since the ’15 season, with many claiming that today’s balls are bouncier, smaller and flatter-seamed – which lend them to jump off the bat and travel farther (i.e. reduced drag). There are those who argue it has more to do with the quality of today’s pitching, players altering the arc on their swings to hit fly balls and the elimination of the two-strike approach (think: plate disciple, shorter swing, avoid strikeout), but the surge in home runs is undeniable. In 2017, 14.2% of all balls hit left the yard (highest rate in MLB history) and teams mashed a MLB record 6,105 home runs (the previous record was 5,693 in ’00). The league has consistently denied there have been any alterations made to the ball.

Fun Fact: Rawlings is credited with producing the first pair of football shoulder pads.

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Author: John Wall Street

At the intersection of sports & finance.

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