It looks like Fanatics Inc. got a bargain with its acquisition of the trading card business of the Topps Co.
Jacksonville-based Fanatics announced the deal Jan. 4 without disclosing the price, but The Wall Street Journal and other financial news outlets reported the sports merchandise company paid $500 million.
Topps was set to go public in August by merging with a special purpose acquisition company, but that deal fell apart when Fanatics reached an agreement with Major League Baseball to take over licensing agreements for baseball cards, which Topps had for 70 years.
Topps was valued at $1.3 billion in its deal to go public, according to a report Jan. 9 by sports business news website Front Office Sports.
That valuation included not only the trading card division but also confections and gift card businesses not included in the Fanatics deal.
According to merger documents filed last year, Topps had total 2020 revenue of $567 million and adjusted earnings before interest, taxes, depreciation and amortization of $101 million.
So, the SPAC merger valued the company at about 2.3 times its revenue and 13 times EBITDA.
The sports and entertainment business of Topps, most of which is included in the Fanatics deal, generated $368 million in revenue and $88.4 million in adjusted 2020 EBITDA.
At $500 million, Fanatics paid about 1.4 times revenue and 5.7 times EBITDA, far less than the multiples in the SPAC deal.
Fanatics’ agreement with Major League Baseball was not scheduled to take effect until Topps’ licensing deal expired at the end of 2025.
By acquiring Topps now, Fanatics gets the baseball card business four years early and also adds trading card deals with several soccer leagues and Formula 1 auto racing.
Separately, Fanatics has card deals with the National Basketball Association, the National Basketball Players Association and National Football League Players Association.
“With trading cards and collectibles being a significant pillar of our long-term plans to become the leading digital sports platform, we are excited to add a leading trading cards company to build out our business,” Fanatics CEO Michael Rubin said in a news release announcing the Topps deal.
Fanatics said all 350 employees of Topps’ sports and entertainment business are joining Fanatics Trading Cards, the subsidiary formed by the company last year to run the businesses.
Fanatics, founded in 1995 by brothers Alan and Mitchell Trager with a single store in the Orange Park Mall, now is valued at $18 billion as it continues to expand its businesses, according to several financial news reports.
Front Office Sports said that valuation is triple its estimated value from August 2020.
The Tragers sold the company in 2011 and it now is part of a Philadelphia-based holding company called Kynetic.
Treace revenue in line with forecast
Treace Medical Concepts Inc. said Jan. 10 it expects to report 2021 revenue of $94.1 million to $94.4 million, in line with its previous forecast of $90 million to $95 million.
Ponte Vedra-based Treace, which produces a surgical system to treat bunions, said revenue grew 64% to 65% from 2020, when its business was affected by the coronavirus pandemic.
As an elective procedure, some patients had to postpone bunion surgery last year as health care providers devoted more resources to the coronavirus.
However, Treace also said revenue grew 53% to 54% from the third quarter of 2021 to the fourth quarter.
“Our business continues to demonstrate the strength of our direct sales channel, as well as the effectiveness of our expanding direct-to-consumer (marketing) and active surgeon training programs,” founder and CEO John Treace said in a news release.
Before its release of preliminary 2021 sales data, Morgan Stanley analyst Drew Ranieri raised his rating on Treace from “equal-weight” to “overweight” Jan. 7.
In a research note, Ranieri said the company’s differentiated procedure is well positioned to gain market share from companies that sell products for traditional bunionectomies.
“When we initiated coverage on Treace in May, valuation had more than reflected positive adoption and utilization dynamics. However, the recent 25% pullback from October levels and our positive bias on the technology and diligence creates an attractive entry point for a high-growth MedTech asset,” he said.
Treace went public at $17 a share in April and more than doubled in its first two months of trading after the initial public offering. But the price fell back to the teens in the past two months.
Ranieri set a $30 target price for the stock and projects revenue to grow to $123 million this year.
“We acknowledge that elective procedures could see fits and starts given interwoven staffing shortages and ongoing variant pressure, but we have more confidence in the company’s ability to expand its surgeon base and drive utilization higher,” he said.
Landstar falls after analyst downgrade
Landstar System Inc. began 2022 trading near record highs. But the stock dropped $9.62 to $169.72 on Jan. 6 after Wolfe Research analyst Scott Group downgraded the Jacksonville-based trucking company from “peer perform” to “underperform.”
Group downgraded Landstar as part of an overall downgrade of the trucking industry from “market weight” to “market underweight,” citing “strong fundamentals but potential for slower freight demand and pricing trends later in the year.”
Wolfe Research’s transport index has jumped 72% in the last two years, Group said in his report.
“Transports have clearly benefited from COVID and ongoing supply chain disruptions with the shift in consumer spending from services to goods, and record pricing power for most modes of transportation,” he said.
The supply chain issues continue, but “inventory levels are finally starting to improve, so we expect to see gradual supply chain improvement this year, leading to slower freight demand and pricing gains” in the second half of 2022, he said.
Group said he is more positive on the railroad sector, reiterating a “market overweight” rating on the rail sector and an “outperform” rating on Jacksonville-based CSX Corp.
Advancing Eyecare acquires Santinelli
Jacksonville-based Advancing Eyecare, owner of several ophthalmic instrument businesses, announced Jan. 5 it acquired Santinelli International, a provider of optical finishing equipment.
Advancing Eyecare was formed by private equity firm Atlantic Street Capital in 2019 when it acquired a majority interest in Jacksonville-based Marco Ophthalmic Inc. and merged it with another eye care equipment company it owned called Lombart Instrument.
Marco, founded in Jacksonville in 1967, provides diagnostic ophthalmic equipment.
Hauppauge, New York-based Santinelli, founded in 1973, provides lens edging equipment.
First Citizens-CIT merger complete
First Citizens BancShares Inc. completed its merger with CIT Group Inc. on Jan. 4, nearly 15 months after the deal was announced.
Approval of the merger announced in October 2020 was delayed as deals creating banks of more than $100 billion in assets are getting more intense scrutiny from federal regulators, according to a report by American Banker after the deal finally was approved in December.
Raleigh, North Carolina-based First Citizens said the addition of CIT makes it one of the 20 largest banks in the U.S.
It now has more than 600 branches in 22 states, including four in the Jacksonville metropolitan area.
CIT did not have branches in Northeast Florida but had a large operations center on Jacksonville’s Southside at 10201 Centurion Parkway N., which now is an operations center for First Citizens.