Smith & Wesson Holding Corporation (NASDAQ:SWHC) Seals Its Deal With Clearview Capital

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By Stefan Larson on January 2, 2015 Company

Smith & Wesson Holding Corporation (NASDAQ:SWHC) recently announced that it has finally sealed a deal with Battenfeld Technologies, the gun accessories makes. The deal was initiated back in November 2014, and now the company will be purchasing it for a total of $130.5 million from Clearview Capital, a private equity firm. The products of the gun maker feature some famous brands, including Wheeler Engineering, Cardwell Shooting Supplies, Tipton Gun Cleaning Supplies, and Lockdown Vault Accessories.

The deal is quite similar to the one that ATK (NYSE:ATK) made with Savage Arms last year. ATK, after a while, announced that it would be spinning off its shooting division in order to make space for its exploration operations. For that purpose, the company made a deal with Orbital Sciences (NYSE:ORB). Chances are that the latter part of the deal of ATK would not apply to Smith & Wesson Holding Corporation (NASDAQ:SWHC). The question then arises as to what the company wishes to achieve by acquiring Battenfeld.

The company plans to double its growth rate by expanding its firearms business. According to the Capital IQ of Standard & Poor’s 500, the company saw a revenue growth of around 7 percent during the last 5 years. The company further stated in a recent press release that its revenues figures of Battenfeld subsidiary company have gained around 18 percent since the year 2006. The company further stated that it expects this subsidiary to perform even better in the coming quarters.

The latest 10 K filling of Smith & Wesson showed that the revenues from its long gun and hand gun segments have increased significantly. The increase in revenues from all the other segments came to a total of 6.8 percent. The company expects its Battenfeld segment to report additional revenue of $55 million for the fiscal year 2016.

The shareholders are wondering if the acquisition deal will bring some benefits for them or not. According to the market analysts, that depends on the future growth of the company. That said, it does not mean that Smith & Wesson Holding Corporation (NASDAQ:SWHC) is not profitable right now. The company is expected to beat its revenues by 27 percent during the current year, and that too excluding the EBITDA, amortization, taxes, interests and reductions. According to the management of the company, the margins, cash, and EPS of Smith & Wesson will expand after the deal has been implemented smoothly.

Where a set of analysts is quite optimistic about the deal, the other one has some concerns. According to some market experts, the price that the company is paying in order to expand its margins and see a growth is far greater than the benefits that it would achieve.

Let’s now come to the stock prices of Smith & Wesson Holding Corporation (NASDAQ:SWHC), the company saw a decrease of 2.77 percent in its stock prices on January 01, 2015. The company has a market capitalization of $508.58 million.