Thomas Gounley

TGOUNLEY@NEWS-LEADER.COM

There may be a state line between them, but Bristol, Virginia, and Bristol, Tennessee, have a lot in common.

Residents zip back and forth from one to the other for work or shopping. The local chamber of commerce serves both cities. A sign on the border heralds both as "A good place to live." Together, the twin cities have a population of about 45,000.

But one difference between the two Bristols has recently drawn some attention locally. The Tennessee side has a Bass Pro Shops. The Virginia side is the location of a rival Cabela's, which just opened in October. The stores are nine miles apart.

Bass Pro, according to recent reports from various news agencies, is interested in purchasing Cabela's. And that concerns the mayor of Bristol, Virginia.

"The only worry I have is Bass Pro buying them [Cabela's] out," Archie Hubbard told the local newspaper last month. "Anybody else it would be no different, just a new owner. I don't know how they would handle it and I don't know how many places they both have stores. This may be a unique situation."

A possible merger of the two companies raises natural questions for numerous communities around the country.

Positive news for Bass Pro is likely positive news for Springfield, its hometown. But for Cabela's base of Sidney, Nebraska — a city of about 6,800 in the western part of the state — the future is more uncertain.

And then there are markets like Bristol — which isn't, as the mayor suggested, entirely unique. Around the country, there are 30 Bass Pro Shops locations within 40 miles of an existing Cabela's store, according to News-Leader research.

If Bass Pro were to acquire Cabela's, store closures likely would be considered in some markets, experts say. The significance of any such moves would be compounded by the fact that both chains' stores, or developments anchored by their stores, are frequently the recipient of public subsidies.

Bass Pro and Cabela's have long had a similar model, with grandiose stores marketed as tourism destinations. A merger would likely deliver certain cost savings — and eliminate a direct competitor.

"We no longer believe that a BassBela’s combination is unlikely," Nathan Yates, an analyst who follows Cabela's, wrote in a late April report.

Bass Pro: No comment on reports

After months of slumping stock prices, Cabela's was targeted by an activist investor last fall.

Elliott Management Corp. announced in mid-October that it had acquired an 11 percent stake in the company. In filings, Elliot said it believed Cabela's was undervalued and that the company should explore strategies to boost its stock price, including putting itself up for sale.

The next month, news agency Reuters, citing unnamed sources, reported one interested suitor: Bass Pro Shops.

CNBC reported the same, citing its own sources. Cabela's, in response, said only that it was exploring its options. In March, the New York Post cited anonymous sources when it reported Cabela's was "getting serious about tracking down a buyer." And last month, Reuters followed on its original report, saying Bass Pro was teaming up with Goldman Sachs for its bid.

"The move gives Bass Pro the equity financing necessary to pursue Cabela's and makes such a deal more likely, given the potential cost savings and synergies a combination of the two U.S. hunting and fishing retailers would bring," Reuters' Lauren Hirsch and Greg Roumeliotis wrote.

An acquisition isn't assured. Reuters reported that other parties are also interested in Cabela's and that the sale process is still in the early stages.

Bass Pro has declined to comment on the reports. In a November appearance on CNBC, Bass Pro founder Johnny Morris said simply that Cabela's was "a great brand we respect" and that “both our companies grew up pretty much the same way, from passion of the founders around the outdoors."



The fact that Bass Pro hasn't refuted the media reports suggests there is some truth to them, according to Jeff Jones, assistant professor of finance at Missouri State University.

Bids for a public company like Cabela's typically come in the form of a "tender offer," Jones said. The prospective buyer — in this scenario, Bass Pro — would reach out to Cabela's shareholders and offer to buy their stock, typically for a premium on the price at which shares are currently trading.

The U.S. outdoor goods industry is a $50 billion market, according to Yates, the founder and director of research of Virginia-based Forward View Consulting. Cabela's has a 4.3 percent share of that market, Yates said, while Bass Pro — a private company — is estimated to have 3.5 percent.

When the initial Reuters report came out in November, Yates wrote that he considered a Bass Pro takeover of Cabela's unlikely, because Bass Pro was the smaller entity. He posited that Cabela's itself, or a major shareholder, might have leaked the news in an attempt to attract other interested buyers.

Yates now believes there's a 90 percent chance that Cabela's will be sold. He still believes a private equity firm is the most likely party to make the acquisition. But Yates said the chance it will be Bass Pro increased when the firm reportedly partnered with Goldman Sachs.

"Through the acquisition of Cabela’s, Bass Pro would eliminate its No. 1 direct competitor, gain leverage with product suppliers, enjoy synergies obtained through merged distribution systems and have access to Cabela’s private label merchandise designs," Yates said.

Worry in Cabela's hometown

Dick Cabela founded Cabela's as a mail order business in Chappell, Nebraska, in 1961, and moved the company one county over to Sidney two years later.

Cabela's as a whole has approximately 20,000 employees, according to the company, the majority of whom work at one of the chain's stores spread across the country. But a Bass Pro acquisition would most likely impact the 2,000 or so who work in Sidney, comprising nearly a third of the town's population.



A sale of Cabela's to a private equity firm would likely limit the impact on Sidney, because there would be no obvious reason to move operations from the current headquarters.

"In the long term, if you're going to have two firms that do basically the same thing, do you need two corporate headquarters? The answer is probably no," Jones said.

Acquisitions are a natural time for companies to make changes. In some recent situations, companies making an acquisition have moved their own headquarters. But those moves have typically been overseas, and for tax purposes.

It's likely, Jones said, that a Bass Pro acquisition of Cabela's would add jobs in Springfield. Bass Pro is already the fifth-largest employer in the metropolitan area.

"I don't think Johnny Morris is thinking, 'I just really want to move to Nebraska,'" Jones said.

At least three of five members of the Sidney City Council, including the city's mayor, work or have worked at Cabela's, according to bios on the city's website. The two council members who don't have a Cabela's position in their bios — one a pharmacist, the second a teacher — did not respond to a News-Leader inquiry. The director of the local chamber of commerce declined to comment.

Nebraska state senator Ken Schilz, who represents Sidney and the surrounding region, told the News-Leader that residents in town were reacting the way "you would expect when the largest employer is looking at something like this."

"They're apprehensive, they're concerned, nervous, anxious," he said.

Cabela's isn't just in the outdoor goods business. The company also has a credit card operation — World's Foremost Bank — based in Lincoln, Nebraska.

"It's not just a Sidney thing," Schilz said. "It's a whole state of Nebraska thing."

Schilz said he has met with company officials but that he doesn't know anything more than the general public. His message to the company, he said, was that "if there's anything that the state of Nebraska can do, we're more than happy to help."

For now, Schilz said, Sidney is in a wait-and-see mode.

Some markets have both stores

Nowhere are Bass Pro and Cabela's closer than in New Brunswick, Canada. Bass Pro has a location in Dieppe, a city of about 23,000. The drive to the Cabela's in the larger city of Moncton is six miles.

On a whole, the two companies' respective footprints are fairly complementary. Bass Pro is strong in the southeastern United States, where Cabela's has few stores. In the northwest, it's the opposite.

Still, there is some overlap. The St. Louis and Kansas City metro areas are among the 30 spots around the country where a Bass Pro store is within 40 miles of a Cabela's location.

On a February 2015 earnings call, before the company was targeted by the activist investor, Cabela's Chief Financial Officer Ralph Castner described places like Bristol — small markets where the company overlaps with Bass Pro — "more as an outlier than anything else."

"I mean, look, it's still a big country and there's a lot of opportunity and we may be closer in some places than we'd like to be, but there's a lot of places for us to go," he said.

While 40 miles might seem a sizable distance, especially in populated urban areas when traffic is factored in, both companies have long maintained that their stores are a destination, attracting customers from a wide area. Bass Pro news releases sent about new store openings in recent years have included a standard line about the company's customers: "The average customer stays 2½ hours and drives an average distance of 50+ miles."

Similarly, Cabela's has stated that it draws "customers not only from the local area, but also from hundreds of miles away."

Analysts: Some store closures likely

Jones said it's not clear whether or not the Cabela's name would continue in the event of an acquisition by Bass Pro. Yates said his suggestion would be to make Cabela's a private label brand only.

"I’d convert the Cabela’s stores to the Bass Pro Shops brand and eliminate the Cabela’s website and catalog to merge marketing efforts," Yates said. "I don’t know enough about Bass Pro’s strategy/management team to forecast their decision, though."

Asked about places like Bristol, Jones said "you're probably going to see some consolidation in those types of markets."

"A lot of it depends on square footage," he said, noting that southwest Missouri is able to support both the flagship Bass Pro store in Springfield and a smaller location in Branson.

Yates said he believed the most natural targets of consolidation would be Bristol, the greater Chicago area — where each company has two stores — and Colorado.

"There are two Cabela’s in the Denver area and one Bass Pro," Yates said. "There’s another Bass Pro located in Colorado Springs, an hour from Denver. We can’t justify all four stores."

But Yates said any closures likely wouldn't be based only on mileage between stores. Connecticut, a fairly small state, would have two Bass Pro-owned stores if the company acquired Cabela's. But Yates said "an affluent and densely populated state could support them both."

"Overall, market size, wealth and the number of tourists seeking outdoor adventures would determine the fate of stores very close to each other," he said.

Both companies' stores backed by taxpayers

It's not just about jobs. Taxpayers in communities around the country are financially vested in the success of Bass Pro and Cabela's stores.

A 2010 report by the New York-based Public Accountability Initiative estimated that projects related to Bass Pro stores had received $567.5 million in taxpayer incentives up until that point. (In a 2013 interview with the News-Leader, a Bass Pro executive called that figure "not even close to accurate" and emphasized that incentives typically go toward the entire development, not just Bass Pro.)

A separate 2012 analysis by the Virginia-based Franklin Center for Government and Public Integrity, which filed hundreds of open records requests to get copies of development agreements, concluded that Cabela's had received $551 million in local and state assistance in the previous 15 years, compared to $1.3 billion for Bass Pro.

"Development agreements could make immediate store closures difficult in the event of a business combination," Yates said. "A city, especially a small one, would be greatly distressed to lose a Bass Pro or Cabela’s. An entire retail and restaurant development could be shattered without its centerpiece."

"If Bass Pro sold a store instead of just leaving it empty, that might help," Yates continued. "The question, however, is, 'Who would buy a Bass Pro/Cabela’s?' It’s a specialty operation with taxidermy, an archery range and an aquarium, so a traditional department store wouldn’t be able to easily move in."

Hubbard, the mayor of Bristol, Virginia, told the News-Leader the city took out $47 million in general obligation bonds to pay for the development that Cabela's now anchors. The hope is that, over time, revenue from sales, property and related taxes will justify that cost.

But that's expected to take 30 years, said Hubbard, who wasn't on council when the deal was approved and said he would have opposed it. Contractually, Hubbard said, Cabela's is only obligated to operate for three years.

Hubbard still thinks the sales rumors might just be an effort to drive up Cabela's stock price. If Bass Pro were to buy its rival, he's hopeful it would continue to operate them as separate brands and keep stores in both Bristols.

Hubbard noted both stores are basically new. Cabela's opened in Bristol, Virginia in October. The Bass Pro on the other side of the border is only a year older than that.

Hubbard acknowledged that, if one store had to close, it would seem logical that Bass Pro would close a Cabela's store over a Bass Pro. But Virginia has the lower sales tax, he pointed out.

"To me, it would make sense to run them both as they are," Hubbard said.

Where's the overlap?

Sustained reports regarding Bass Pro Shops' interest in acquiring rival Cabela's raise questions about how the potential impact on markets where the two outdoor retailers compete.

Both companies say their stores draw customers from a wide area, and the stores — or developments anchored by the stores — have frequently been the recipients of public subsidies.

Around the country, there are 30 Bass Pro Shops locations within 40 miles of an existing Cabela's location, according to News-Leader research. Those locations are:

Dieppe, New Brunswick: 6 miles away from Cabela's in Mocton, New Brunswick

St. Charles, Missouri: 7 miles (Hazelwood)

Rocky View, Alberta: 9 miles (Calgary)

Bristol, Tennessee: 9 miles (Bristol, Virginia)

Anchorage: 10 miles (Anchorage)

Cincinnati: 12 miles (West Chester)

Oklahoma City: 13 miles (Oklahoma City)

Denver: 16 miles (Thornton, Colorado)

Council Bluffs, Iowa: 16 miles (La Vista, Nebraska)

Olathe, Kansas: 17 miles (Kansas City, Kansas)

Ashland, Virginia: 17 miles (Short Pump)

Clarksville, Indiana: 17 miles (Louisville, Kentucky)

Portage, Indiana: 18 miles (Hammond)

Tacoma, Washington: 19 miles (Lacey)

Cary, North Carolina: 19 miles (Garner)

Grapevine, Texas: 20 miles (Fort Worth)

Pearland, Texas: 23 miles (League City)

Mesa, Arizona: 26 miles (Glendale)

Concord, North Carolina: 26 miles (Fort Mill, South Carolina)

Garland, Texas: 27 miles (Allen)

Denham Springs, Louisiana: 28 miles (Gonzales)

Independence, Missouri: 28 miles (Kansas City, Kansas)

Niagara-On-The-Lake, Ontario: 35 miles (Cheektowaga, New York)

Foxborough, Massachusetts: 36 miles (Hudson)

Vaughan, Ontario: 37 miles (Barrie)

Rossford, Ohio: 37 miles (Dundee, Michigan)

Bolingbrook, Illinois: 37 miles (Hoffmann Estates)

Colorado Springs: 38 miles (Lone Tree)

Round Rock, Texas: 38 miles (Buda)

Gurnee, Illinois: 40 miles (Hoffmann Estates)

Source: Store information tabulated from the respective websites for Bass Pro Shops and Cabela's. Approximate mileage between stores calculated using Google Maps driving directions.