Friday, August 5, 2016
Zayat Stables, which campaigned 2015 Triple Crown winner and Horse of the Year American Pharoah and won Eclipse Awards as outstanding owner and breeder of the year, has engaged an investment banker to raise up to $300 million to expand its bloodstock holdings and launch a new veterinary services company in North America.
Piper Jaffray, founded in 1895 and headquartered in Minneapolis, Minn., has prepared a four-page “investment opportunity” brochure detailing Zayat Stables' past accomplishments and future plans for the capital it intends to raise.
Launched in 2005 by New Jersey businessman Ahmed Zayat, Zayat Stables has “pioneered a disruptive business model that has created the #1 brand in the horse racing business,” the brochure states.
“The company has a successful racing and breeding business model that breaks traditional industry norms (in which horses are often viewed as ‘hobby' investments) and takes a sophisticated, analytical approach to horse selection. Zayat stables has developed the ‘Z Process,' a distinguished method of equine analytics that incorporates cardiovascular, fatigue curve and gait analysis, which leads to an increased probability of selecting successful racing prospects and maximizing performance.”
Zayat EquineOneAs a result, the brochure states, Zayat Stables “has been able to generate considerable value and offer more stable, consistent and higher performance than anyone else in the Thoroughbred racing and breeding business.”
It further states: “The equine market is fragmented with no major players – most participants are unsophisticated using traditional methods with very little innovation or use of advanced analytics.”
The document features some of the stables successes, including American Pharoah, which it lists as having a “sale value” of $35 million as a stallion and estimated market value of $100 million. Other stallions listed are Pioneerof the Nile ($6 million sale value/estimated market value of $43 million); Zensational ($11.5 million sale value/$6 million estimated market value); Eskendereya ($10 million sale value/$9.5 million estimated market value); Bodemeister ($13.3 million sale value/$15 million estimated market value) and Paynter ($9.5 million sale value/$10 million estimated market value).
According to the brochure, Zayat Stables has “considerable opportunity” to leverage intellectual property rights and has been approached about “an American Pharoah branded movie, video game, children's book, bourbon brand and GoPro for virtual live experience.”
The veterinary services business, referred to in the document as EquineOne, intends to “leverage the Zayat Brand and its deep relationships within the equine industry to develop and expand into the equine veterinary services sector. The sector represents a highly underserved and fragmented market throughout the U.S. posing a significant business opportunity. … Ahmed Zayat has already identified and/or been in active discussions with several potential key acquisition targets at attractive valuation multiples. In addition, the company intends to capitalize on its renowned ‘Zayat Stables' brand name to partner with equine veterinary specialists and create the first nationally branded equine health services chain to further meet the underserved needs of the market.”
Piper Jaffray has been engaged to raise $75 million to $100 million for “initial use” (to be divided equally for acquisition of racing/breeding assets and vet services assets) and a total of $200 million to $300 million for “near term use.” It projects year five revenue of $554 million and EBITDA of $240 million and says Zayat Stables earned $10 million in EBITDA in 2015 on $24 million in revenue.
Zayat Stables, which has twice been North America's leading money-winning Thoroughbred owner and among the top 10 in six of the last nine years, reorganized under Chapter 11 bankruptcy in 2010, agreeing to pay off its creditors in full over a four-year period.
Read the Zayat Stables' EquineOne Investment Opportunity Brochure
Source: Paulick Report
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