ANOKA, Minn. (BRAIN) — Vista Outdoor Inc. will acquire Fox Racing for $540 million with the potential for an additional $50 million depending on the lifestyle gear brand’s financial performance.

Fox Racing CEO Jeffrey McGuane will continue to lead the company after the acquisition closes, as will the entire management team. Vista Outdoor expects to close the transaction in the second quarter of 2023.

Vista Outdoor’s sports unit includes Bell Helmets, Giro, Blackburn and QuietKat. Fox Racing offers protective gear, including helmets and apparel for ATV and motocross. The acquisition will add approximately $350 million in revenue to Vista’s outdoor products segment.

Fox Racing has been a separate company from Fox Factory – the suspension brand – since the late 1970s. Fox Factory is now a publicly traded company that also owns RaceFace, Marzocchi and Easton cycling.

Fox Racing said it grew its net sales by a compound annual growth rate of about 20% from 2019 to 2021 and is expected to increase more than in 2022.

“Over the past four years, we have built a diverse portfolio of iconic outdoor brands led by a proven management team that continues to execute well and deliver strong results for our shareholders,” said Chris Metz, CEO of Vista Outdoor.

“With the acquisition of Fox Racing, we continue the successful execution of our strategy of using accretive acquisitions to expand our leadership position and our ability to capitalize on long-term growth opportunities in outdoor recreation. The acquisition of Fox Racing meets all of our financial objectives and strategic acquisition criteria, even before considering the potential benefits of combining Fox Racing with our existing business. category-leading brands like Fox Racing to our portfolio while maintaining a strong balance sheet and reinvesting in our existing businesses to drive organic growth.”

Just over a year ago, Vista Outdoor acquired Colorado-based e-bike brand QuietKat.

“We are thrilled to join the Vista Outdoor family,” said McGuane. “Together, we can leverage the heritage of our leading brands, take advantage of new supply chain synergies, extend our deep and established channels and target a broader customer base. Combined with greater access to capital for innovation and scale, we believe this transaction is a win Vista Outdoor’s management team has proven they have an effective and repeatable acquisition model, making Vista Outdoor the acquirer of choice for Fox Racing. Rarely can an acquired business be able to stay true to its culture and customer base, while enjoying the benefits of Vista Outdoor’s Centers of Excellence, extensive retail partnerships, innovation engines and… a management team that enables a founder’s mentality and a results-driven culture. Needless to say, we’re excited about this new chapter for Fox Racing.”

For 2022, Fox Racing’s full-year net sales and adjusted EBITDA are expected to be approximately $350 million and $55 million, respectively. Vista Outdoor expects the transaction to be immediately accretive to earnings, excluding transaction costs, transition costs and increased inventory.

Vista Outdoor said it plans to finance this acquisition through a combination of a $600 million asset-based revolving credit facility, which will replace Vista Outdoor’s existing asset-based revolving credit facility, and $350 million secured term loan facility. Following the closing of this transaction, the leverage ratio of Vista Outdoor is expected to be less than 1.5 times, within the target leverage ratio limit of one to two times.