<PAGE> 1
Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 2, 1998
GART SPORTS COMPANY
------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
Delaware 000-23515 84-1242802
- -------------------------------------------------------------------------------
(State or other juris- (Commission file (IRS Employer
diction of incorporation) number) Identification No.)
2000 Broadway
Denver, Colorado 80203
- -------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
(303) 861-1122
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On July 2, 1998 the Registrant issued the press release attached hereto
as Exhibit 99.1, which is incorporated herein by reference, announcing that it
is seeking a strategic combination with The Sports Authority, the nation's
largest full-line sporting goods retailer.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
99.1 Press release issued July 2, 1998 by the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GART SPORTS COMPANY
(Registrant)
Date: July 2, 1998 /s/ Thomas B. Nelson
--------------------------------
Thomas B. Nelson
Senior Vice President
<PAGE> 3
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
99.1 Press Release dated July 2, 1998
<PAGE> 1
Exhibit 99.1
CONTACT: Thomas T. Hendrickson Investor Relations:
Executive Vice President Naomi Rosenfeld/Carolyn Capaccio
Chief Financial Officer Press: Stacy Berns/Lauren Gargano
Gart Sports Company Morgen-Walke Associates
303/863-2204 212/850-5600
FOR IMMEDIATE RELEASE
GART SPORTS PROPOSES STRATEGIC COMBINATION WITH
THE SPORTS AUTHORITY VALUED AT $20.00 PER TSA SHARE
Denver, CO, July 2, 1998 -- Gart Sports Company (NASDAQ: GRTS) announced
that it is seeking a strategic combination with The Sports Authority (NYSE:
TSA). In a letter sent to Mr. Jack Smith, Chairman and CEO of The Sports
Authority, and The Sports Authority's Board of Directors today, Gart Sports
proposed a strategic transaction in which holders of 70% of TSA's shares
outstanding would receive $20.00 per share in cash for their shares. The
remaining 30% of TSA shares would remain outstanding and would represent a 51%
ownership interest in the common stock of the combined company; this portion is
estimated by Gart Sports to have an equivalent value to the cash portion of the
consideration on a per share basis.
Gart Sports has received a letter from Chase Securities which indicates its
confidence in its ability to arrange the full amount of financing necessary to
complete the transaction. This proposal has the full support of Gart Sports' two
principal shareholders, Leonard Green & Partners, L.P. and the Hochberg family.
In the letter to Mr. Jack Smith, Gart Sports stated, "The combined cash and
stock consideration to your shareholders represents a 32.2% premium over the
closing price of your common stock on July 1, 1998 and a 23.8% premium over the
value of the consideration offered by Venator Group (NYSE: Z) as of such date.
In this proposal, your shareholders would have an opportunity to participate
meaningfully in the potential for further equity appreciation at the combined
company which we believe is significant. . . Furthermore, we believe that your
shareholders would be better served by continuing to hold an ownership position
in a pure-play sporting goods superstore retailer rather than a retail
conglomerate."
Doug Morton, Chairman, President and Chief Executive Officer of Gart Sports
stated, "We believe that the logic of this combination is compelling. In
addition to representing substantially higher value than the existing Venator
Group offer, the combination of Gart Sports and The Sports Authority would
create a nationwide sporting goods superstore retailer with approximately $2.5
billion in revenues, and the opportunity to create significant operational
efficiencies.
(more)
<PAGE> 2
The two companies' respective market positioning should be greatly enhanced
since there is minimal overlap between the existing store bases. We are very
excited by the potential of this business combination, and believe that our
proposal clearly supports the best interests of The Sports Authority's
stockholders."
On May 7, 1998, The Sports Authority, the nation's largest full-line
sporting goods retailer, entered into a merger agreement with Venator Group,
pursuant to which TSA shareholders would receive stock in Venator Group. The
Sports Authority shareholders are scheduled to vote on the transaction later
this summer.
Gart Sports is the second largest full-line sporting goods retailer in the
U.S. and the leading full-line sporting goods retailer in the Rocky Mountain
region, with 1997 pro forma combined revenues of approximately $700 million. The
Company offers a comprehensive high-quality assortment of brand name sporting
apparel and equipment at competitive prices, and operates 122 stores in 16
states under the Gart Sports and Sportmart names.
Leonard Green & Partners, L.P. is a Los Angeles based private merchant
banking firm specializing in organizing, structuring and sponsoring management
buyouts of established companies.
(letter follows)
<PAGE> 3
Except for historical information contained herein, the statements in this
release are forward-looking and made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve known and unknown risks and uncertainties, which may cause actual
results, operations and business of Gart Sports or the company resulting from
the proposed transaction in future periods to differ materially from forecasted
results, operations or business. Those risks include, among other things, the
competitive environment in the sporting goods industry in general and in Gart
Sports' or the company resulting from the transaction's specific market areas,
inflation, changes in costs of goods and services, management's ability to
integrate the operations of Gart Sports and The Sports Authority, and economic
conditions in general and in such specific market areas. Certain of these and
other risks are more fully described in the Company's filings with the
Securities and Exchange Commission.
# # #
<PAGE> 4
July 2, 1998
Mr. Jack A. Smith, Chairman and Chief Executive Officer and
Members of the Board of Directors
THE SPORTS AUTHORITY, INC.
3383 North State Road 7
Ft. Lauderdale, FL 33319
Gentlemen:
We are pleased to propose to you a strategic combination of Gart Sports Company
("Gart") and The Sports Authority, Inc. ("TSA") which we believe will provide
your shareholders with aggregate consideration of $20.00 per share as follows:
$20.00 per share in cash to your shareholders for 70% of TSA's outstanding
common shares; the remaining 30% of currently outstanding shares would remain
outstanding and would represent a 51.0% ownership interest in the combined
entity's common stock. Based upon the earnings potential of the combined entity
and our expectation of a positive reaction from the investment community, we
believe that the stock retained by your shareholders should have a value of
$20.00 per share. The combined cash and stock consideration to your shareholders
represents a 32.2% premium over the closing price of your common stock on July
1, 1998 and a 23.8% premium over the value of the consideration offered by
Venator Group, Inc. ("Venator") as of such date. In this proposal, your
shareholders would have an opportunity to participate meaningfully in the
potential for further equity appreciation at the combined company which we
believe is significant.
Enclosed is a letter from Chase Securities Inc. ("Chase") which indicates its
confidence in its ability to arrange the full amount of financing necessary to
complete the transaction. If you have any questions regarding this letter we
would be pleased to provide you with a contact at Chase. This proposal has the
full support of our two principal shareholders, Leonard Green & Partners, L.P.
and the Hochberg family.
We would propose that the combined company be named The Sports Authority and
that members of your management team as well as your store employees play a role
in the combined company's operations. We also assure you and your management
team that your reward for your past achievements and your future incentives
would be no less favorable than your current expectations under the proposed
Venator acquisition.
We reiterate that the combined company's equity has the potential for
substantial appreciation following this strategic combination and that TSA
shareholders will be able to participate meaningfully in this opportunity from
their retained ownership in the combined company. Furthermore, we believe that
your shareholders would be better served by continuing to hold an ownership
position in a pure-play sporting goods superstore retailer rather than a retail
conglomerate.
<PAGE> 5
Sentiment from shareholders and the investment community to the proposed
transaction with Venator has been unfavorable as evidenced by the relative
underperformance of both TSA and Venator shares in the time period following the
announcement of the acquisition by Venator. Based upon the change in closing
prices from May 7, 1998, the day of the announcement of the acquisition by
Venator, through July 1, 1998, the TSA stock price has declined 16.0% and the
Venator stock price has declined 12.2% while the S&P 500 has gained 4.9%. We
believe that the investment community has serious reservations regarding
Venator's ability to successfully operate TSA which suggests that Venator=s
stock performance could continue to be disappointing.
We should also point out that, contrary to the representation contained in your
merger agreement, we believe that because of NYSE rules, Venator is required to
obtain a shareholder vote to consummate its proposed merger.
We believe that sentiment from shareholders and the investment community to a
Gart and TSA strategic combination would be overwhelmingly positive. The
combination of Gart and TSA would create a nationwide sporting goods superstore
retailer with approximately $2.5 billion in combined revenues. The combined
company would operate more than 300 stores and would be approximately five times
as large as its nearest public sporting goods superstore competitor. In
addition, significant operational efficiencies would be gained by the combined
company through the implementation of a "best practices" integration plan to
merge the operations of Gart and TSA. We plan to finance the transaction
conservatively so that the combined company could continue to capitalize on
consolidation opportunities.
Gart is a company with a history of increasing sales and profitability. Gart has
posted positive comparable store sales increases for each of its past nine
fiscal quarters, a performance which was unmatched by any other sporting goods
superstore retailer during the same time period. In early 1998, Gart acquired
Sportmart, Inc. ("Sportmart") and has already substantially completed the
integration of Sportmart into Gart's operations, although the benefits of this
combination have not yet been fully reflected in Gart's financial statements. We
believe that the potential for equity appreciation available to the combined
company's shareholders from simply completing the integration of Sportmart into
Gart's operations, continuing to effect positive change at Sportmart store level
operations and educating the investment community about Gart is significant.
At this point we request that you provide us with access to non-public
information regarding TSA, subject of course to the execution of a
confidentiality agreement, and similarly, we are prepared to give you comparable
access to information regarding Gart. We believe that you have both the right
and the obligation to provide such information based upon obligations to your
shareholders and the provisions of your existing merger agreement.
This letter is being simultaneously released publicly because we believe that we
are obligated to our public shareholders to do so and we believe that your Board
of Directors and shareholders, as well as the marketplace generally, should be
informed of this strategic alternative. Our proposal is, of course, based upon
publicly available information and we look forward to the receipt of
confidential non-public information to confirm and supplement the publicly
available information.
We are prepared to meet at your earliest convenience to exchange information. We
hope that you share our enthusiasm for the combination of Gart and TSA and we
look forward to your prompt response to this proposal.
Sincerely,
GART SPORTS COMPANY
By:____________________
John Douglas Morton
Chairman of the Board, Chief Executive Officer and President
cc: Jack Levy, Merrill Lynch & Co. Inc.
