Cabela’s path to merger ran through the stock market

Cabela’s will merge with its competitor, Bass Pro Shops, in a $5.5 billion deal. Now, the town of Sidney in the Nebraska panhandle is wondering about the future of the hunting and outdoor equipment company that has called the town home for almost 50 years.

In late 2015, a group of so-called activist investors including the hedge fund Elliott Management bought up shares of Cabela’s and started pushing for changes.

But for that to happen there was one change that financial observers and people around Sidney say changed the direction of the company. That’s when Cabela’s went public in 2004 and sold stock in the company. Before that Cabela’s was always privately owned.

In the early 2000’s, Cabela’s entered into an expansion period. The company created a bank to offer financing and manage their Cabela’s credit card. They also started to build more stores, but needed more money to continue expanding.

“They sold shares to raise money and that money was intended to be used and was used to expand the company,” says Geoff Friesen a professor of finance at the University of Nebraska Lincoln. “And so that increased access to capital, that increased liquidity, comes with a price and in this case that price was giving up some control.”

Friesen says funds like Elliott Management look for companies that are fundamentally sound but are also underperforming in some way. They buy stock, push the company to make changes and cash in when the stock goes up. When the fund bought its stake in Cabela’s in 2015, the company's stock was on a downward slide.

“That probably reflected a number of things including the decline in same store sales,” Friesen says. “Why, when the economy seems to be rebounding, is Cabela’s not?”

Friesen says that’s the kind of contradiction that would get more attention. While same-store sales and the stock price were down, the banking side of Cabela’s was doing well and the company was still making a profit. Elliott Management bought an 11 percent stake in Cabela’s, and rumors about Bass Pro started from there.

In October Cabela’s announced that it will become part of Bass Pro Shops in a $5.5 billion deal. The stores and retail business go to Bass Pro. Capitol One will take over processing of the Cabela’s credit card from the company's facility in Lincoln.

From a shareholder’s perspective, Friesen says the Bass Pro merger has paid off. Cabela’s stock has doubled from a low point reached in 2015. But there is more than stock earnings to consider for Sidney, home to Cabela’s headquarters.

Cabela’s started in Chappell, Nebraska when Dick and Mary Cabela started selling fly fishing flies through classified ads. As the company grew, it moved to Sidney in 1969 to a former John Deere implement building near downtown where Cabela’s still has some offices today.

Now there are more than 80 Cabela's stores in the U.S. and Canada, and the company is still based in Sidney where it employs around 2,000 people, in a town of about 6,800.

Bass Pro has said it intends to continue the Cabela’s brand and maintain a workforce in Sidney. The burning question for people there is what kind of workforce and how many people. No more information is likely to be available until the deal is finalized next year.

In the meantime, people in Sidney say their community has gone through hard times before – when the Sioux Army Depot closed in 1967 and took around 2,000 jobs, and when the oil industry went bust in the 1980s. Whatever happens this time, they say they’ll work through it.

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