The Currency is our ongoing look at economic and business news in New Hampshire.
Portsmouth Investment Company Bets Big On Female Leadership
Pax World Funds, a major American investment management company located in Portsmouth, is betting that companies with female leadership will outperform the stock market.
There are 406 companies in Pax’s new index fund, including Microsoft, General Electric, and Estee Lauder. Besides being well-established brands, they have one thing in common: women in leadership positions. Ninety-seven percent of all the companies in the fund have two or more female board members. In a traditional index fund, says Pax CEO Joe Keefe, women sit on only about 11 percent of board seats.
"You know, there's significant research at this point showing that where women are better represented on corporate boards and where women are better represented in senior company management, that those companies actually perform better," he says.
It’s not that women are better at business than men.
“What the research points to,” Keefe says, “is that diverse groups make better decisions than non-diverse groups.”
The Pax Ellevate Global Women’s Index Fund isn’t just talking the talk. It’s chaired and co-managed by Wall St. heavyweight Sally Krawcheck, former president of the Global Wealth & Investment Management division of Bank of America.
Joe Keefe says the Women’s Index Fund has received more interest in its first month than many of Pax’s other funds. And, he says with some pride, the idea is clearly catching on. Barclay’s just launched its own index based on companies with women at the top. The Barclay’s index tracks 85 U.S. companies, and requires at least a quarter of board members be female.
If you’ve ever played hockey, chances are you’ve laced up a pair of Bauer skates. But the Exeter-based business is branching out far beyond its roots in the Canadian ice hockey market. Late last month, it had its Initial Public Offering on the New York Stock Exchange under its new name, “Performance Sports Group,” raking in $110 million.
Over the past six years, it’s been on a massive spending spree, acquiring companies with footholds in markets ranging from lacrosse and soccer to baseball and roller hockey. But its bullish streak has a cost. Industrial research firm Morning Star reports that while Performance has $195 million in equity, it carries $130 million in debt.
The IPO was supposed to make up some of that debt. So I asked CEO (and New Hampshire native) Kevin Davis if the nail-biting debut went as expected.
“We had a fixed number of dollars we were trying to raise to help pay down some of the debt that we incurred as part of the Easton acquisition," he said.
"And you know, interestingly, from the time that we launched the offering, or announced it, to the time we closed it—typically, stocks will be a little bit depressed as the market is waiting for new shares to come in. Our stock actually appreciated over that time. And I think our underwriters told us that we had one of the most successful offerings in the last 60.”
Q: You brought up Easton-Bell. A few months ago, Performance acquired Easton-Bell’s baseball and softball division, which branched you folks out into diamond sports. How much did you pay for it, and what’s the company’s strategy on that moving forward?
A: We paid $330 million for it, which is about nine times their trailing earnings. The strategy really is all about growth in that category. They have some fantastic technology; they were in a position where their business was slightly under-funded previously. And them having the number one brand in the sport, we see a tremendous opportunity for growth in that business.
Q: And just to give a little background here, the company under the old Bauer name, has switched hands a couple of times since the 1990s. First acquired by Nike, which then turned around and sold it to a private equity firm back in 2008. You’ve been with the company during each of those periods in one position or another, so how has it changed since you first came onboard?
A: It’s certainly a much different company now. We’re far more diversified than we were—as you noted, we were primarily an ice hockey equipment business under Nike. You know, it was a great business under Nike. And the challenge for Nike with us was that our category was just so small relative to the investments that they could make in other categories. But now with the investment that we had from our private equity sponsor, and the incredible employees that we have, we’ve been able to not only continue to grow every single year since we departed from Nike, but we’ve also had the flexibility to add other sports.
Q: After the private equity firm—that’s Kohlberg and Company—acquired Bauer back in 2008, you went on a pretty big buying spree. Could you dig a little bit more into what you bought, and what the rationale is behind this rapid expansion? Because you grew really, really, quickly.
A: When we separated from Nike we had the privilege to be appointed as the President and CEO, and of course in 2008, as you may recall, not exactly the best timing to be the head of a consumer products company. But we made a very strategic decision back in 2008. Which is: when all of our competitors are laying off employees and cutting back on spending, and are going to, you know, weather the storm through the recession, we actually made the opposite decision. We made a calculated risk assessment to say, you know what? We’re going to invest more in marketing, more in R&D, we’re not going to lay any people off. So that first, we’ll be the brand of choice for retailers when they see that we are going to be an investing brand, and not somebody that’s cutting back. And B, when the recession is over—as they all become over—we will still have the great employee base that we’ve always had to continue to grow our business. And as that strategy started to unfold in 2008 and 2009, we started making these acquisitions. So when we were purchased from Nike, it was only four months later that we made our first acquisition. And from there, we made an acquisition almost every year.
Q: It sounds like you bet big on a strong recovery. Has the subsequently weak recovery impacted your strategy at all, or changed the way that you’re looking at the market in the future?
A: No. You know, I mentioned that it was a calculated sort of risk that we took. One of the things that we did was we surveyed a couple of thousand hockey playing families in North America in 2008. And we asked the parents, ‘Going forward, what is your expectation, you know, with the looming recession?’ And the overwhelming response that we received from that work was that parents will cut back on going to dinner, they’ll cut back on vacations, they’ll cut back on a lot of things. But they were going to spend the same or more on ice hockey equipment in the coming seasons. So we have seen, unlike many other companies in our space, we never had a down year.
Davis says since spinning off of Nike during The Great Recession, Performance Sports Group has tripled its workforce. It now employs about 150 people.
Check here next week for The Currency, NHPR’s look at business and the economy around the Granite State.