Compass Diversified Holdings is hitting it out of the park with a large gain on the sale of a baseball subsidiary, while the rest of its business continues to round the bases.
Management’s preferred profit measure of adjusted Ebitda—short for earnings before interest, taxes, depreciation, and amortization—was $104 million in the third quarter, up 13%, versus the Wall Street consensus estimate of $100 million. There was more news on Thursday: Compass said that it had reached a deal to sell its Marucci Sports subsidiary, a maker of baseball bats and other equipment, to Fox Factory Factory Holding for $572 million, generating a pretax gain of around $235 million. “It really is a home run for us,” Compass CEO Elias Sabo tells Barron’s.
Compass had a much faster turnaround with Marucci, which it acquired in 2020 for $200 million. Since then, it has invested another $70 million in the subsidiary via bolt-on acquisitions. Compass’ target companies can grow at a high-single digit to low double-digit rate annually. The firm recently added a team focused on healthcare industry investments.