Hockey equipment maker CCM for sale as private equity owner looks for an exit

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The maker of the sticks that National Hockey League stars Auston Matthews, Connor McDavid and Sidney Crosby use to put the puck in the net is up for sale.

On the eve of the NHL playoffs, private equity fund manager Birch Hill Equity Partners has put CCM Hockey up for auction. CCM, one of the two dominant hockey equipment companies, is expected to fetch a price that is a significant multiple of the $110 million Birch Hill paid for the company seven years ago.

Toronto-based Birch Hill recently acquired US investment bank Robert W. Baird & Co. Inc. hired to oversee the potential sale, according to two sources involved in the process. The Globe and Mail is not naming the sources because they are not authorized to speak on behalf of the companies.

Birch Hill decided to shop for Montreal-based CCM after receiving several unsolicited offers for the equipment maker from private equity funds, the sources said. They said there is no guarantee the process will lead to a sale. Spokespeople for Birch Hill, CCM and Baird declined to comment.

According to the sources, potential buyers of CCM include sporting goods manufacturers and large private equity funds. One of them said Birch Hill expects to complete the process, with or without a sale, by the summer, to avoid a prolonged period of uncertainty around ownership. According to a recent press release, CCM has 500 employees.

Birch Hill acquired CCM from Adidas AG in 2017 when the German manufacturer shifted its focus back to shoes. Baird, an investment bank based in Milwaukee, Wisconsin, advised Adidas on the sale.

At the time, CCM was losing money. In a press release announcing the transaction, Birch Hill said it bought the company because CCM had a clear path to an improved margin profile and the potential to grow its market share.

Over the past seven years, CCM has more than doubled sales and increased profit margins by acquiring companies including a sportswear company and a skate magazine manufacturer. The company now generates $75 million in annual earnings before interest, taxes, depreciation, and amortization (EBITDA), according to one of the sources. Private equity-owned companies such as CCM typically sell at a multiple of their EBITDA.

According to one source, CCM's most profitable business areas are hockey sticks and apparel. A limited edition Auston Matthews Jetspeed stick sells for $499 with a signature, while a beer league player can easily spend $300 on a stick made of carbon fiber, Kevlar and other composite materials.

Private equity fund managers like Birch Hill typically buy a company, spend a decade improving its operations, then sell it and return any profits to their supporters, keeping about 20 percent of the profits.

In 1994, Toronto-Dominion Bank veterans founded TD-T Birch Hill and the company now has $5 billion in capital under management. Over the past thirty years, Birch Hill has invested in 71 companies and sold 57 of these companies.

The Baird investment banker handling the CCM sale for Birch Hill is Joe Pellegrini, a former National Football League lineman who now focuses on mergers and acquisitions involving consumer products companies, one of the sources said.

CCM supplies sticks, skates and helmets to approximately 40 percent of NHL players, along with Professional Womens Hockey League stars such as Sarah Nurse. The company's main rival is Bauer, which also has about 40 percent of NHL pros using its equipment. In the past, CCM executives have said the hockey equipment industry is relatively mature, with annual growth of roughly 2 percent, and that the key to success is gaining market share from rivals.

The other major hockey stick manufacturer is Sherwood Hockey, owned by Canadian Tire Corp. CTC-T, which scored last year by signing number one draft pick Connor Bedard. Canadian Tire acquired the 66-year-old Sherwood brand in 2018.

Outside of CCM, Bauer and Sherwood, the smaller players on hockey rinks include New Balance Inc. and True Temper Sports. According to data service Mordor Intelligence, hockey players around the world spent $1.9 billion on equipment last year.

CCM's roots date back to 1899, when the company was founded as Canada Cycle & Motor Co. Ltd. Six years later, CCM turned to hockey equipment, using scrap metal from the bicycle and auto parts factories to make skate blades. In the 1930s, CCM dominated the market: 90 percent of hockey players wore their skates.

In 2004, Reebok bought CCM for $400 million, including debt. The following year, Adidas bought Reebok.

CCM rival Bauer, founded in Kitchener, Ontario, in 1927, also returned to Canadian hands after being owned by a global shoe company and a private equity fund.

In 1995, Nike Inc. acquired Bauer and the sports brand Cooper for $395 million. In 2008, the shoe company exited hockey by selling Bauer to a group led by Canadian businessman Graeme Roustan and American investment firm Kohlberg & Co. for $200 million. The company went public in 2014.

In 2017, Peak Achievement Athletics Inc. acquired Bauer about. Peak is a partnership between Montreal-based Power Corp. subsidiary Sagard Holdings Inc. and Fairfax Financial Holdings Ltd., headquartered in Toronto.