Cabela's (CAB) to be acquired by privately held rival Bass Pro Shops for $5.5 billion.

• Hunting and fishing retailer Bass Pro Shops is buying its Nebraska-based rival, which has struggled with declining sales in recent years.

   

 

Privately held Bass Pro Shops will pay $65.50 per share in cash for Cabela's, representing a premium of 19.2% over Friday's closing price.

Long known for large-format destination stores, Cabela's has lost ground to smaller, nimbler competitors and online retailers. Sales at stores open at least a year fell 1.3% in the first half of 2016, compared to a year earlier, according to a securities filing.

The number of purchases at Cabela's stores fell 8.1% during that period, reflecting a drop-off in foot traffic as customers bought less clothing and footwear from the retailer, although hunting sales increased and average revenue per transaction rose 8.2%.

The deal marks a dramatic expansion of the outdoor retailing empire controlled by Bass Pro Shops CEO Johnny Morris, who founded the company in 1972. The billionaire will lead the newly combined entity as CEO and will retain majority ownership.

Bass Pro Shops has about 99 stores and 20,000 employees. Cabela's has about 85 stores and had about 19,700 employees at the end of 2015, according to securities filing.

To close the deal as planned in 2017’s first half, Bass Pro Shops said it will sell $2.4 billion in preferred stock. Assuming Bass Pro Shops can keep Cabela’s half-billion dollars worth of equity in Cabela’s credit-card business—an operation that is being acquired by Capital One Financial (COF)—Bass Pro Shops still must come up with about $2.5 billion. If much of that remainder is funded by debt, the combined retail chains might be paying hundreds of millions of dollars a year to service it and the preferred stock—on top of Bass Pro Shops’ existing debt.