What looked like it could become a brawl over sports equipment manufacturer Performance Sports Group Ltd. has taken a friendly turn.
Shareholder Brookfield Capital Partners Ltd. has entered into a confidentiality agreement with PSG's largest investor, Sagard Capital Partners LP, the U.S. investment firm controlled by the Desmarais family's Power Corp., the two companies announced Thursday in a filing with the U.S. Securities and Exchange Commission. They said they could act together on potential proposals, including a possible restructuring of PSG, equity issuance or debt refinancing.
The move comes just days after Sagard made a similar disclosure about its discussions with Fairfax Financial Holdings Ltd. The pair said Monday that they had ruminated on PSG's evolution as a company, referencing similar potential plans and proposals. Fairfax has no equity stake in PSG, the maker of the iconic Bauer brand of hockey equipment.
A spokesman for PSG declined to comment.
Sagard, which owns 17 per cent of PSG, was the first to say it was considering its options for its investment back in early September and that it had its own confidentiality agreement in place with the company.
Brookfield started amassing shares of PSG in August and now owns a 13-per-cent stake. That the asset manager has also entered into talks with Sagard indicates the three companies would collaborate on a possible bid for the struggling sports equipment company, or other financial restructuring plans.
PSG is contending with a host of issues stemming from stalling growth and its heavy debt load, a result of its 2014 acquisition of the baseball and softball units of Easton-Bell Sports Inc. The Exeter, N.H.-based sporting-goods maker is under investigation by the U.S. Securities and Exchange Commission and the board has launched its own review of the company's accounting.
PSG, which also owns the well-known Easton sports brand, is now approaching a critical moment. After postponing the filing date for its yearly audited financial statements from Aug. 15, PSG's deal with its lenders was to file before this Friday, Oct. 28. The company is at risk of defaulting on its $440-million (U.S.) loan if it can't complete the work by that date.
Having a deep-pocketed supporter like Brookfield on the same side as Fairfax and Sagard, rather than launching a possible competing bid, suggests that the companies would be more likely to succeed in their plans, although no deal has yet been struck.
Since Monday, shares of PSG have fallen about 3 per cent in New York and Toronto. Prices have slumped more than 60 per cent so far in 2016.