What's going on?

$4.5 billion for fishing and outdoor gear?! Yessir! Bass Pro Shops bought one of its competitors, Cabela�s, in a deal that combines two of America�s biggest sellers of outdoor sports equipment (think: hunting and fishing).

What does this mean?

Sports retailing is in a tough situation. Like many stores, they are essentially middlemen matching brands with buyers. In this case, it�s fishing and hunting brands, but the same problems are befalling stores that serve a wider market (i.e. Sports Authority filed for bankruptcy earlier this year). The problem is that consumers are increasingly buying online, often directly from the brand. This can benefit companies like LuluLemon who sell their products themselves, but it isn�t so good for companies that sell running shoes or fishing rods from a variety of brands.

Why should I care?

For markets: Just like in the investment management industry (above), joining forces is a defensive move.
These companies will be able to decrease their cost base and, in theory, increase sales. Cabela�s stores are primarily in the west while Bass Pro Shops� stores are mainly in the east (of Canada and the US). Playing defense is sometimes necessary, but at some stage companies need to move forward and score a goal� or, hook a fish. In other words, they�re going to need to figure out how to drive sales in the future beyond combining with other firms (e.g. sell more online).


The bigger picture: An �activist� hedge fund probably played a big role.
Activist funds are known for investing in companies that they feel could be worth more if management drastically changed its strategy (e.g. restructure its operations in a big way or, as was the case here, sell itself). One such fund, Elliott Management, bought a big stake in Cabela�s last year. Sometimes these funds are criticized for having short-term aims (e.g. selling the company instead of improving it), but the counter-argument is that they act in the best interest of shareholders (which would appear to be the case with Cabela�s, whose shares are now up about 35% this year).