ARI had been eyeing 50 Below ‘for some time’

Dominion Enterprises loses bid despite higher offer

Milwaukee-based ARI Network Services, Inc. was granted the purchase of website provider 50 Below’s retail assets in U.S. Bankruptcy Court in early November.

ARI’s accepted bid was $5 million, which is coming from ARI and a loan from an ARI shareholder, ARI president and CEO Roy Olivier told Powersports Business.

“We’re putting in about $1.5 million just out of our cash flow, and about $3.5 million is being provided by a shareholder of ARI in terms of a note. We have done this with this shareholder before,” he said. Of the total, $900,000 was paid immediately following the sale in the form of a certified check, according to court documents.

ARI’s purchase includes 50 Below’s website services in the powersports, automotive tire, medical equipment and pool and spa industries.

ARI has been eyeing an acquisition of 50 Below for some time. Four years ago the company looked into purchasing 50 Below, followed by another attempt in January and February 2012.

“We were very interested in the entire thing — the people, the product, the customers — and we have been for a long time,” Olivier said.

Because of these efforts, he was especially relieved when the 6 ½-hour hearing came to a close on Nov. 7.

“It was like finishing a race that you’ve been in for two months and finally winning. It was just a huge relief to just get to the end of the acquisition process and get the approval of the judge,” Olivier explained.

The sale came just two months after Duluth, Minn.-based 50 Below filed for Chapter 11 bankruptcy. The company owed $12 million to 20 creditors, including the IRS, the Minnesota Department of Revenue and the Minnesota Unemployment Insurance Program. Eight bids were delivered, ranging from $100,000 to $9 million for the whole company, the Duluth News-Tribune reported. Emerald Connect of San Diego was awarded the $3.5 million purchase of the financial division of 50 Below, which provides products to brokers, Olivier explained. ARI is second in line, with a $3 million bid for that division if Emerald Connect cannot close within two weeks.

Dominion Enterprises, a dealer services company that encompasses PowerSports Network, Traffic Log Pro, Cycle Trader and Ziios, also bid for 50 Below’s assets. Dominion’s bid of $5,150,000 was slightly higher than ARI’s, but it was turned down.
Olivier credited his company’s winning bid primarily to the fact that ARI plans to make Duluth the hub of ARI’s powersports and automotive division, keeping jobs in the city.

“We haven’t finalized the details with due diligence, but our current thinking is the Duluth location will be the center of our powersports, automotive tire, medical and pool and spa businesses,” he said. “50 Below has been so successful in powersports, so we figure we’re going to continue to let them do what they’re doing.”

Other factors that trustee Nauni Jo Manty may have considered included other legal issues and the fact that ARI informed Manty that 50 Below had been using data ARI shared with the company for longer than originally agreed upon.

“She got a lot of feedback from employees and customers that indicated that they prefer ARI,” Olivier reported.

If ARI cannot complete the purchase of 50 Below’s retail assets within two weeks of the judgment, Dominion will be awarded the sale.

Because of the bankruptcy process, Olivier admits ARI had a limited opportunity to do due diligence on short- and long-term plans, however the company expects to have a more concrete strategy in place within four to six weeks after the judgment.

For now, dealers using 50 Below and/or ARI services shouldn’t expect much to change, however long term, ARI plans to combine both company’s assets. 50 Below’s strengths come in its technology, employees, thousands of customers and high CSI scores. In fact, 50 Below scored highest in a recent website provider CSI survey. Olivier believes ARI has the best OEM modules, and the company plans to release new products at Dealer Expo in February, following its recent acquisition of Ready2Ride, Inc., a provider of enhanced aftermarket fitment data.

“I think it’s a transitional acquisition to the extent that we were kind of the number four market share holder in terms of powersports; this moves us up to number one or two. I think it’s going to help us provide better products and better services in the powersports industry,” Olivier said.

In addition to the powersports component, ARI is also looking forward to entering the automotive tire market.

“We’ve had a strategic plan to move into aftermarket auto for some time now,” Oliver said. “We’re very excited about the powersports business and the auto tire business.”

ARI also plans to maintain the medical and pool and spa segments of 50 Below, though those divisions account for less than $1 million of 50 Below’s $13 million in annual sales. ARI intends to leave 50 Below’s name intact until a more definite long-term plan is developed.