Fox Factory Looks to Buy Lizard Skins' Parent Company

Nov 6, 2023 at 5:50
by Ed Spratt  
photo

Fox Factory is looking to acquire baseball and softball equipment brand Marucci Sports for $572 million.

Bicycle Retailer reports Fox Factory is acquiring the owner of Lizard Skins' parent company Wheelhouse Holdings, Inc. from Compass Diversified for the sum of $572 million.

The purchase will mark Fox's first sports acquisition since it bought Marzocchi back in 2015, more recent acquisitions were related to its powered-vehicle business.

The holding company Compass has an interesting history with Fox and the bike industry as it previously owned Fox for a number of years and was a former owner of CamelBak before it sold the brand to Vista Outdoor in 2015. Outside of the sale of Marucci Sports to Fox Factory, Compass still owns some cycling-related brands including BOA Technology and PrimaLoft.

Fox Factory's purchase of Marucci Sports comes after it announced a company-wide revenue drop of 19% in its third-quarter earnings report. Net income dropped from $50.8 million in the same quarter last year to $35.3 million this year, a fall of 30%.

The company's Specialty Sports Group, featuring the brands Fox Factory, Marzocchi, Easton cycling and Race Face, saw a drop in net sales of 58% from $173.9 million last year to $72 million this year in the same quarter.

Fox Factory said the drop in sales from the Specialty Sports Group was due to "higher levels of inventory across various channels.”

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122 Comments
  • 103 0
 Golden time to be a global enterprise with Billys in the bank. Bad time to be ..... literally anything else
  • 62 4
 This. This. This. As always in times economic hardship the rich get richer - they have the resources to capitalize.
  • 21 42
flag TwoNGlenn (Nov 6, 2023 at 8:29) (Below Threshold)
 @metsrangers35: because they were prepared?
  • 11 1
 not sure wrapping a sticker round the aircan is going to cure it
  • 1 0
 It's a better indicator than the company going bankrupt because no other company sees the upside in the future.
  • 78 0
 Lizard skins neoprene will now be offered in black, and for slightly more, gold.
  • 125 0
 But not quite gold. A mix between bronze and gold that never quite matches.
  • 19 33
flag AndrewFleming (Nov 6, 2023 at 6:25) (Below Threshold)
 @Been-Jamin: And looks tacky to 99.9% of the population. The remaining 0.1% being mountain bikers with more money than taste.
  • 11 6
 @Been-Jamin: and doesn’t look that great anyway.
  • 8 1
 Lizard skins neoprene should have an expensive service every 12 months otherwise warranty is void.
  • 2 0
 Damn, I love those neoprene shock sleeves! They actually work!
  • 1 0
 Someone offered Lizard Skins for the prize money at the last Vintage MTB Fest, prices were still labelled on there in belgian francs (pre-2000), LOL.
  • 64 0
 This made no sense until I saw that Lizard Skins makes racket grip tape. Hello PICKLEBALL MONEY!
  • 14 0
 Huge if true
  • 28 2
 i hope they make kashima paddles and claim some bullshit benefits, "40% more whack-y than a standard paddle"
  • 3 0
 Lizard Skins makes huge bank in the baseball and softball markets too.
  • 1 0
 Also, road bike grip tape.
  • 2 0
 @mior: no they need the opposite of kashima on the colour wheel, so it's more grippy / less slidy in your hands
  • 1 0
 @mior: Kashmina paddles would be awful for trying to play with English.
  • 42 0
 The company's Specialty Sports Group, featuring the brands Fox Factory, Marzocchi, Easton cycling and Race Face, saw a drop in sales of 58% from $173.9 million last year to $72 million the past quarter.

Yikes
  • 12 1
 Ask me how I know that more heady sales are coming our way? Keep waiting folks.
  • 1 0
 Means they got a good deal?
  • 22 0
 I'm confused by this sentence, Ed.

Are you comparing the sales of 2022 to 1 quarter from 2023?
  • 6 9
 @mrbrighteyes: C'mon. Do you even bro math, bro?
  • 5 1
 @mrbrighteyes: I've just added some clarification to the story. I believe the numbers given in the third-quarter report are comparing net sales from the same quarter last year and this year.
  • 5 0
 @mrbrighteyes: I assume it is the same quarter this year vs last.

Either way, quarterly comparisons on businesses like this are risky. If the timing of their bookings and shipments year on year are always the same, fine, but if that shifted substantially the quarterly comparisons don't mean jack.

I have no doubt their sales are down. Surely brands are planning lower production for 2024 and 2025, which would slow Fox sales.

This is happening in nearly all consumer durables and luxury goods. Deep discounts will be coming up next year as dealers face having to pay their inventory financing.
  • 10 36
flag Mtbdialed (Nov 6, 2023 at 7:46) (Below Threshold)
 huh.....it would almost seem like there were especially out of the norm economic conditions at play here, caused by goverment policy....


what.....could....that....beee.......????
  • 18 1
 @Mtbdialed: be a real patriot, die for the economy!
  • 11 0
 This is classic bull-whip effect... next up, reduced production/supply and tight inventory. Comparing year on year doesnt paint the whole picture but makes for attention grabbing numbers.
More relevant would be a comparison to pre-pandemic Q3 numbers.
  • 5 16
flag Mtbdialed (Nov 6, 2023 at 9:13) (Below Threshold)
 @FaahkEet: well, funny you'd phrase it that way, as if the economy completely tanks, lots and lots of people will indeed die!

But hey, lets just all pretend that our government didn't try and do just that.....
  • 23 10
 @Mtbdialed: I'll take great depression over drinking l drowning in my own mucus.

Despite folklore, the great depression wasn't deadly, it was hard but a "tanked" economy is not even a blip as to how deadly covid could have been with it raging through the population with overloaded medical care and they themselves also succumbing to covid.

But yeah, the right wing hate radio with high school educations really had it all figured out.
  • 3 0
 It was all boosted COVID lockdown generated sales. People now went back to their normal activities.
  • 40 0
 Love Marzucchi
  • 29 0
 Ok, ten minutes on google and this makes a bit more sense. Fox Factory Holdings are the parent company of Fox Factory, Marzocchi etc. That parent company has a turnover of $1.61B (companiesmarketcap.com/fox-factory/revenue), so Marucci is about a third their size. I was very confused that a £50m company was buying a company ten times its size!

Fox Factory Holding's already have non-bike brands (en.wikipedia.org/wiki/Fox_Factory), so they already are used to dealing with non-cycling brands. Those currently look to be mostly automotive (trucks especially) - I'd imagine both trucks and MTBs will take a hit in a downturn. Whereas.. baseball I'd imagine is a relatively stable market, possibly with international growth potential (not my area) and probably fairly recession proof, so maybe Marucci looks like a good hedge for FFH?

Possibly there's some manufacturing efficiency / supply-chain economies of scale in sourcing/manufacturing considering bats and forks both use aluminium alloys, I'm not sure where that manufacturing is done.
  • 8 0
 "Whereas.. baseball I'd imagine is a relatively stable market, possibly with international growth potential "

Well, they already have their World Series Wink
  • 1 0
 They appear to be purchasing businesses that are down the line from their own, truck suspension outfitters. I imagine to take more control of the market. This acquisition is actually quite unusual based on what they usually purchase
  • 23 0
 Marzucchini
  • 11 0
 Mars socky bombers
  • 3 0
 7.5wt zucchini bread when?
  • 19 0
 But why
  • 6 0
 Probably a great value and opportunity to make money.
  • 12 1
 @SlavikChris: and remember kids, if somethings on sale it means youre saving the discount amount, not spending the final cost!
  • 10 0
 I think fox sees the value in some lizard skin shock boot covers haha
  • 37 0
 Because Fox has the tail logo and lizards have tails.
  • 4 1
 @GumptionZA: "Spend more to save more!" Because that makes sense.
  • 6 0
 Lizard skins makes a portion of their money in video games, golf, and baseball. Maybe Fox trying to gain some security through expanding for when the bike industry sucks. Like right now
  • 4 0
 “You guys are pathetic. No wonder Smithers made me head bee-guy“
  • 4 0
 Well, I just bought 4 rolls of Lizard Skins bar tape, so they obviously saw my investment as a market trend. Tbh, I do think Lizard Skins makes the best bar tape in the game if you're into the curly bar stuff.
  • 1 2
 I guess it makes sense if you consider that they already own Easton. Just absorbing some competition in that ball sports market?
  • 1 0
 @GumptionZA: 98% of gamblers quit right before hitting a jackpot. Never quit.
  • 2 1
 @mrbrighteyes: Really? I just bought the red Lizard Skins 2.5mm DSP tape and it's simultaneously the most expensive and worst tape I've ever bought. It was stained black from hand oils almost instantaneously and it's peeling around all the corners. Am I doing it wrong? I'm normally a black 2.5mm rubberized bar tape guy.
  • 5 0
 @gmiller720: Easton baseball and Easton cycling split as companies a long time ago. Easton baseball is owned by someone else entirely now.
  • 2 0
 @TEAM-ROBOT: I guess your experience may vary? I wouldn't say it's the longest lasting bar tape, but I've always had the grip wear out before anything starts peeling away.
  • 2 0
 @TEAM-ROBOT: Easton diamond sports has changed hands a few times since but is currently owned by Rawlings.
  • 3 0
 I've been asking myself the same question. Especially when there was an opportunity to by Fox Head for the same amount of money and that would have made more sense on both sides of the company.

The only things I've come up with...
1. Less drastic ups and down depending on product release cycles (bike industry). More annual stability.
2. Diversified portfolio again gives them more stability. Especially during a bike industry down turn.
3. They source aluminum. Maybe that sourcing can help with production in other parts of the Fox portfolio?
4. Oury and Lizardskin... maybe they can use the rubbers or production plants to help Raceface?
5. The news was timed to offset the announcement of missed numbers and massive sales drop. My guess is that it saved stock holders a couple hundred million dollars by keeping the dip in the 60's instead of the 40's.
  • 4 0
 @onemanarmy: You probably answered you own question. While Fox Racing (Fox head) was acquired for roughly the same amount last year, the acquisition of Marucci is most likely an attempt to diversify into other sports categories (for the reason you already pointed out). The soft goods business would still be heavily tied into the same sports/industries as the suspension business.

There just doesn't seem to be any real integration opportunities here to make me think it had much to do with that.
  • 2 0
 @sino428:

The Fox head purchase does a bit more though.

You have the unification story. Unifying the brands for the first time since 1974.
You have the addition of protective gear that supports both sides of the company. Powered/Bike.
You have the addition of an apparel company that knows what it's doing. So they can either handle sourcing and production for all of the other brands or you can start to kill off things that are unnecessary.
The purchase of Ride Concepts would have been unnecessary.
Etc etc etc.

Now saying that... I think Fox is better off where they are. Vista has very intelligently rebranded and consolidated. They screwed over Giro/Bell/Blackburn (not stoked on that) in the process but I think even those businesses will likely start to rebound in time. But that company seems to have figured out how to unify its brands. Can't say the same thing for the other end of the Fox.

And they service all seasons. So they have releases throughout the year. You've got bike season. Moto season. Can expand on SxS market and even into the off-road market... like why not make something to compete with IMPACT in that market. Spring clothes. Winter clothes. Etc. They have less ups and downs as it's a multi-season multi-platform business model.
  • 3 0
 @TEAM-ROBOT: Experiences with that tape seem to vary wildly. Not sure about the staining issue but, if the peeling you describe is the grippy rubber surface coming off the backing, then I recall a sort of consensus that it can be due to pulling the tape too tight when wrapping it. Some experienced users seemed to think that when you stretch the tape the layers can start delaminating, and then they rapidly fall apart in use. The amount of stretch required to damage it was far less than you'd normally do with cork tape or other more traditional types, so you sort of need to recalibrate your technique for it. I like the way the Lizard Skins stuff feels, but never took the risk myself as it seemed pretty pricy to be rolling the dice, but that might be something to try if you give it another go.
  • 2 0
 @DCF: let's hope none of that money is in bungie or blizzard then
  • 1 0
 @Jacquers: and they both have a ‘Q’ in them.
  • 2 0
 @thekaiser: Yep, the cellophane wrapper even has a sticker that says "do not stretch when installing". Even stretching just a little (as needed to get a tight fit around the levers), the top layer does start to separate from the foam backing.
  • 1 0
 @thekaiser: Noted. Could absolutely be down to installation error. I was pretty careful to not stretch it extra tight when I wrapped the bar, but here's the weird part- it's less about the layers delaminated, and more about the red grippy part shrinking to reveal the white padding layer underneath, so I have white stripes around my bar, kinda like a peppermint stick. Never seen it before.
  • 2 0
 @mrbrighteyes: Add me to the "I don't like this bar tape" club. Just bought a new roadie which came with Lizard Skins, and I can't stand it. Once I get settled in my setup, I will rewrap it.
  • 14 0
 Any body else notice the ads change here recently from near 100% MTB to cycling to non cycling an now complete spam companies (Tactial hoodies etc)

Tight times, an unless Fox got a bargain price............? rubs chin emoji
  • 1 1
 Some of it seems to be cookie related and targeted. I recently listed some stuff on Gumtree, then started getting Gumtree ads on here a few days later.
  • 2 1
 How the hell do people not have ad blockers in 2023
  • 15 2
 Always so sad when a mom-and-pop shop like Compass Diversified gets bought out by these giant, soulless corporations.
  • 13 3
 Boa rebound and compression on the new 38?????
  • 12 2
 Blackrock has 12% stake in Fox, f*ck these globalist war mongering scum
  • 12 1
 Good luck ridding your life of things Blackrock has a stake in.
  • 1 0
 @sino428: that would be impossible and silly. what you can do though is criticize them in the public eye.
  • 4 0
 Hmmmmm...Marucci makes round carbon tubes that are light and strong (baseball and softball bats) I'm sure the business in Baseball and Softball is good.....but perhaps there are additional crossover technology and economies of scale with Easton, Race Face and Fox
  • 1 1
 Wouldn't be a surprise. They bought Marz for the patents
  • 10 5
 Yes of course, make a leveraged buyout to the tune of 16 times your current net income, what could possibly go wrong? Nobody mention Chain Reaction...
  • 32 2
 Seems like standard procedure for everyone buying a house these days
  • 2 0
 @svenie: zing
  • 1 0
 wiggle
  • 7 1
 ...but why? $572m seems like a massive chunk of money to be spending when your revenues are only $35.3m.
  • 8 0
 I have no idea if this is (or will be) a good deal or not but you aren’t really looking at it the right way. They aren’t “spending” money here. This isn’t an expense.

They are buying another company. They are making an investment. Buying an asset that they hope will generate more revenue. Fox current revenue really has no bearing on wether this will ultimately be a good deal or not.
  • 2 0
 Logic!? Overrated!
  • 4 0
 @sino428: Exactly.

This is pretty common when you're talking about companies playing in the billions.

If this company has decent growth and solid revenues it'll add to those revenue totals.

Easiest way to look at it...
Say the bike industry continues tanking for the next year until stock levels are depleted.... so bike side of the business is taking losses or lower than desired profits. Then you add this company in and say they make $50m a quarter over the next year... that offsets those bike industry losses. Then when the bike industry recovers and those segments are making money the profits will have huge spikes.

Or you have offsetting business. You know certain quarters the bike businesses will be down so you buy a company that is up in those same quarters. So they trade support. It's like pushing your kid in a stroller and then you get hurt and they push your wheelchair.
  • 3 0
 The title on this is a little misleading- The title implies that the story is: “big bike company buys little bike company” - but the real story is big bike company concerned about future is diversifying into baseball products”
  • 8 2
 And that was when Fox lost its way...
  • 5 0
 If they get lost we can go on a Fox hunt.
  • 2 0
 Same trends that happened during the pandemic are finally hitting the bike industry. Only big dogs survive, and they will consolidate all companies into a handful of megacoprs through acquisition that will control most of the market.
  • 5 3
 I have to be honest, this move makes a ton of sense. First, develop a shock that blows up and explodes religiously, name it the X2 because that’s how many times it will die before you you can blink. Then… and only then, once thousands of these little time bombs are out there squirting oil and shrapnel on bikes and users galore, you offer the solution. A protective coating to protect the 11,000 NX equipped bike from said oil and shrapnel. Step 2 do not under any circumstances initiate a recall for the shit show shocks (SSS *TM*) cause that would hurt your image and also just cause fock mem
  • 4 2
 Get caught up... the new shocks fix all of the issues and have had tremendous feedback, even from the haters. And you can get yours fixed for free. You're complaining about stupid stuff. EVERY major company has products that occasionally have issues and every major company has recalls. EVERY ONE OF THEM. At least they owned up to it, addressed it, fixed it and have offered to help those that are stuck with bad shocks.
  • 5 0
 Drop in sales due to high stock inventory? sounds right
  • 2 0
 wonder how you can sell a big heap of stuff? oh yeah fire sale
  • 5 0
 They make excellent grips. I hope they don't muck up their products.
  • 2 0
 I said the same exact thing. The LS Northshore grips are great and they better not mess with them. Lol.
  • 2 0
 Yes, My new Fav grip for sure. Soft, yet decent life and grippy!
  • 4 0
 Fork and shock boots for all!
  • 1 0
 brake lever and headset boots for connoisseurs
  • 3 0
 I like Lizard Skins grips, but at the rate I buy them, I was never going to keep the company afloat.
  • 4 0
 Meanwhile underpays it's people and hamstrings the passionate people
  • 1 0
 The optics only matter when it's the labor...
  • 2 0
 Lizard Skins Northshore grips have been my favorite grips for a while now. Fox better not discontinue those grips or change them. Wink
  • 3 0
 something tells me this won't glide like kashima does
  • 2 0
 Fox Factory making fork boots great again!

*now also available with Kashima coating
  • 2 0
 Sketchy time to be making big purchases.
  • 3 0
 Good time to be making a big purchase. Buy low, sell high. Not saying it was a good idea, but it was good timing.

The opposite: the suckers who bought Kona.
  • 1 0
 @JustinVP: LOL! The holding company bought this chunk of the business 3 years ago for $200m. Selling it for over $500 now... Fox is not buying low....
  • 1 0
 @JustinVP: I do agree with the basics of buy low sell high-manny are saying storm ahead so I don't think we're near the lows yet.
  • 1 0
 @JustinVP: well bike ind is seeing lows..guess I was just makn broader statement about big purchases..wants vs needs etc
  • 3 0
 Nice catch.
  • 1 0
 Finally! You will be able to have the correct shade of orange to match the fork lowers
  • 1 1
 you think if they have enough money to buy Lizard skins for that much money they would have enough money to hire enough people to answer their phones in a timely manner.
  • 1 0
 Neoprene stanchion protectors coming soon to every new Fox fork.
  • 1 0
 Foxy Skins has a nice ring to it
  • 1 0
 so...kashima baseball bats soon??
  • 1 0
 Kashima baseball bats.............
  • 1 0
 How are they going to Kashima coat grips and frame protectors?
  • 1 0
 Interesting stuff.
  • 1 0
 Lotta money for tape
  • 5 8
 What a tangled web of vulture capitalists investors looking for a fast buck rather than the long term interests of the company
  • 5 0
 So Fox is a 'tangled web of vulture capitalists..?" I thought there were a suspension and components company who has been around for quite some time? Who knew?
  • 4 3
 @bman33: just about everyone who cared to look.
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