1003-00004 · Harrowgate Private Equity Fund IV LP · Regulatory

antitrust-risk-assessment.docx DOCUMENT M&A / Corporate

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP One Liberty Plaza, 55th Floor New York, NY 10006

MEMORANDUM

To: Oliver Mackenzie, Responsible Partner, Mergers & Acquisitions, Calderwood & Harkness LLP

Cc: Harrison Wexford, Billing Partner, M&A, Calderwood & Harkness LLP Ryan Kowalski, Lead Associate, M&A, Calderwood & Harkness LLP Megan Chu, Working Associate, M&A, Calderwood & Harkness LLP Rebecca Talmadge, Partner, Head of Consumer & Retail, Harrowgate Capital Partners LLC Jonah Whitfield, Principal, Deal Lead, Harrowgate Capital Partners LLC

From: Elaine Forsythe, Specialist Partner, Antitrust & Competition, Calderwood & Harkness LLP

Date: April 2, 2025

Re: Antitrust Risk Assessment — Proposed Acquisition of Pennfield Holdings, Inc. (Nasdaq: PNFD) by Harrowgate Private Equity Fund IV LP (Project Summit)

C&H Matter No.: 1003-00004

I. Executive Summary

The purpose of this memorandum is to assess the substantive antitrust risks associated with the proposed acquisition of Pennfield Holdings, Inc. ("Pennfield" or the "Target"), a publicly traded specialty retailer of outdoor lifestyle products, sporting goods, and adventure apparel, by Harrowgate Private Equity Fund IV LP ("HPE Fund IV" or the "Buyer"), a private equity fund managed by Harrowgate Capital Partners LLC ("HCP" or "Harrowgate"). The proposed transaction involves a take-private acquisition for an aggregate merger consideration of approximately $980,000,000, to be structured as a reverse triangular merger in which Pinnacle Merger Sub, Inc. ("Merger Sub"), a newly formed wholly owned subsidiary of HPE Fund IV, will merge with and into Pennfield, with Pennfield surviving as a wholly owned subsidiary of HPE Fund IV.

Based on our analysis of the competitive landscape, market structure, and the composition of Harrowgate's existing investment portfolio, we conclude that the proposed transaction presents low antitrust risk and is unlikely to draw a substantive challenge from either the Antitrust Division of the United States Department of Justice (the "DOJ") or the Federal Trade Commission (the "FTC"). The principal reasons supporting this conclusion are as follows:

(1) The specialty outdoor and sporting goods retail market in which Pennfield operates is highly fragmented, characterized by numerous national, regional, and online competitors, with no single firm holding a dominant market position. Under any plausible market definition, the market exhibits low concentration and vigorous competition.

(2) Harrowgate's existing investment portfolio — across all four flagship funds and associated co-investment vehicles — contains no companies with meaningful horizontal overlap in the relevant product or geographic markets in which Pennfield competes. HPE Fund IV is a financial buyer, and the transaction does not combine two competing businesses.

(3) No vertical integration concerns are present. Pennfield is a retailer, not a manufacturer or supplier, and Harrowgate does not own or control any businesses operating in the outdoor and sporting goods supply chain.

(4) The transaction does not result in a material increase in market concentration under any plausible market definition. Pennfield's estimated national market share in the specialty outdoor retail segment is approximately 3–5%, and the acquisition by a financial sponsor does not alter the competitive structure of the market.

The transaction is subject to the premerger notification and reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), 15 U.S.C. § 18a, and the implementing rules promulgated thereunder, 16 C.F.R. §§ 801–803. An HSR Act filing is required because the aggregate merger consideration of $980,000,000 exceeds the 2025 size-of-transaction threshold of $119.5 million. The applicable filing fee for transactions valued between $500 million and $1 billion under the 2025 fee schedule is $280,000. We anticipate making the HSR filing on or about April 8, 2025, the day following the expected execution of the Merger Agreement on April 7, 2025. The initial 30-calendar-day waiting period is expected to expire on or about May 8, 2025, assuming no early termination is granted and no second request is issued.

We assess the likelihood of a second request (a formal request for additional information and documentary material pursuant to 15 U.S.C. § 18a(e)) as very low, estimated at less than 5%. The probability of an enforcement action or consent decree requiring divestitures or other structural remedies is negligible. We recommend proceeding with the HSR filing on the anticipated timeline without the need for antitrust-related structural remedies, divestitures, or hold-separate commitments.

The balance of this memorandum sets forth the factual and analytical basis for this assessment.

II. Transaction Overview

A. Parties

Buyer. The acquiring entity is Harrowgate Private Equity Fund IV LP, a Delaware limited partnership formed in 2023 for the purpose of making private equity investments primarily in mid-market consumer and specialty retail businesses. HPE Fund IV's general partner is Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company. The investment manager and sponsor of HPE Fund IV is Harrowgate Capital Partners LLC, a Delaware limited liability company headquartered at 1200 Market Street, Suite 3100, Wilmington, Delaware 19801. HPE Fund IV has aggregate capital commitments of $4.8 billion (2023 vintage). Harrowgate Capital Partners LLC manages approximately $14.2 billion in total assets under management across four flagship private equity funds (Funds I through IV) and associated co-investment vehicles. Harrowgate's investment strategy focuses on mid-market consumer and specialty retail businesses with strong brand equity, fragmented competitive landscapes, and significant e-commerce acceleration opportunities. The firm has a demonstrated track record of partnering with management teams to drive value creation through operational improvements, digital transformation, and selective add-on acquisitions within its portfolio platforms.

Target. Pennfield Holdings, Inc. is a Delaware corporation whose common stock is publicly traded on the Nasdaq Global Select Market under the ticker symbol "PNFD." Pennfield is a leading specialty retailer focused on outdoor lifestyle, sporting goods, and adventure apparel. The company operates 187 company-owned full-format store locations across 34 states and 22 outlet store locations, for a total of 209 physical retail locations. In addition to its brick-and-mortar presence, Pennfield operates a national e-commerce platform that accounts for a growing percentage of total revenue. Pennfield employs approximately 8,400 associates across its corporate headquarters, distribution centers, and retail locations. The company's headquarters are located at 4500 Commerce Boulevard, Suite 800, Charlotte, North Carolina 28202. Pennfield's senior management team is led by Chief Executive Officer Catherine Langford, Chief Financial Officer Derek Simmons, and Chief Operating Officer Maxwell Dunn, each of whom is expected to continue with the company following the closing of the transaction and to participate in a management rollover equity program.

Merger Sub. Pinnacle Merger Sub, Inc. is a newly formed Delaware corporation and wholly owned subsidiary of HPE Fund IV, organized solely for the purpose of effectuating the proposed transaction. Merger Sub has not conducted any business activities, has no employees, and has no assets or liabilities other than those incidental to its formation and the transactions contemplated by the Merger Agreement.

B. Transaction Structure

The proposed transaction is structured as a reverse triangular merger under Section 251 of the Delaware General Corporation Law ("DGCL"). Pursuant to the terms of the Agreement and Plan of Merger (the "Merger Agreement"), expected to be executed on or about April 7, 2025, Pinnacle Merger Sub will merge with and into Pennfield (the "Merger"), with Pennfield surviving the Merger as a wholly owned subsidiary of HPE Fund IV. Upon consummation of the Merger, the separate corporate existence of Pinnacle Merger Sub will cease, and Pennfield will continue as the surviving corporation.

The aggregate merger consideration is $980,000,000. Each outstanding share of Pennfield common stock (other than shares owned by Pennfield, HPE Fund IV, or Merger Sub, and shares held by stockholders who validly exercise and perfect appraisal rights under DGCL § 262) will be converted into the right to receive $15.95 per share in cash, without interest and subject to applicable withholding taxes. The per-share merger consideration was determined on a fully diluted basis, reflecting 61,450,000 fully diluted shares outstanding, consisting of approximately 58,200,000 basic shares of common stock outstanding and approximately 3,250,000 shares issuable upon the exercise or settlement of outstanding stock options, restricted stock units ("RSUs"), and other equity-based awards under Pennfield's equity compensation plans. In-the-money stock options will be cancelled at closing in exchange for a cash payment equal to the excess of the per-share merger consideration over the applicable exercise price, and outstanding RSUs will vest and be settled in cash at the per-share merger consideration.

The per-share merger consideration of $15.95 represents a premium of approximately 30.95% to Pennfield's 30-day volume-weighted average price ("VWAP") of $12.18 as of the undisturbed date, and a premium of approximately 10.0% to Pennfield's 52-week high closing price of $14.50. On an enterprise value basis, the transaction implies an EV/EBITDA multiple of approximately 6.9x based on Pennfield's fiscal year 2024 EBITDA of $142 million.

C. Pennfield Financial Profile

Pennfield's financial performance for the most recently completed fiscal year is summarized below. Pennfield operates on a retail fiscal calendar, with its fiscal year ending on January 31 of each year. Accordingly, references to "FY 2024" refer to the fiscal year ended January 31, 2025.

Pennfield's revenue base is diversified across product categories and geographic regions, with no single product category or state accounting for a disproportionate share of total revenue. The company's revenue mix is approximately 65% brick-and-mortar retail, 30% e-commerce, and 5% outlet sales, reflecting a multi-channel retail strategy. Pennfield's financial profile is consistent with a well-established mid-market specialty retailer operating in a competitive and dynamic retail environment.

D. Financing Overview

The proposed transaction will be financed through a combination of committed debt facilities, sponsor equity, co-investor equity, management rollover equity, and available cash on the Target's balance sheet. The financing structure is summarized below:

The Senior Secured Term Loan B and the Senior Secured Revolving Credit Facility are being provided pursuant to committed debt financing letters from Falconer National Bank, N.A. and Dunmore Capital Markets LLC, copies of which have been provided to the M&A deal team. The Revolving Credit Facility is expected to be undrawn at closing and will be available for working capital and general corporate purposes of the surviving company post-closing. Ashford Growth Partners LP, a growth equity and co-investment fund, will contribute $60 million of co-investor equity alongside HPE Fund IV's commitment. Members of Pennfield's senior management team, including CEO Catherine Langford, CFO Derek Simmons, and COO Maxwell Dunn, will collectively roll over approximately $21.5 million of their existing equity in Pennfield into equity in the post-closing parent holding company structure, demonstrating their continued commitment to the business and alignment with Harrowgate as the new sponsor.

The financing structure does not raise antitrust or competition concerns. The debt financing does not involve any lender with a competing retail interest that would create a conflict, and the co-investment by Ashford Growth Partners LP does not introduce any horizontal overlap, as Ashford's portfolio does not include specialty outdoor or sporting goods retail businesses.

III. HSR Act Filing Requirements

A. Size-of-Transaction Test

Under the HSR Act and its implementing regulations, notification to the FTC and the DOJ is required before certain acquisitions that satisfy specified jurisdictional thresholds can be consummated. The primary jurisdictional threshold is the size-of-transaction test, which requires that, as a result of the transaction, the acquiring person will hold an aggregate amount of voting securities and assets of the acquired person valued in excess of the applicable threshold. The size-of-transaction threshold is adjusted annually for changes in the gross national product; for transactions closing in 2025, the threshold is $119.5 million.

The aggregate merger consideration for the proposed acquisition is $980,000,000. This amount substantially exceeds the 2025 size-of-transaction threshold of $119.5 million. Moreover, the transaction value of $980 million also exceeds the higher threshold of $478 million, which is significant because transactions valued above that threshold are reportable regardless of whether the parties satisfy the size-of-person test. Accordingly, the filing obligation is triggered under the size-of-transaction test alone, and an HSR Act premerger notification filing is required.

B. Size-of-Person Test

Although the size-of-person test need not be satisfied for transactions valued in excess of $478 million (as discussed above), we note for completeness that both parties would independently satisfy the applicable size-of-person thresholds even if such analysis were required.

With respect to the acquiring person, HPE Fund IV is a $4.8 billion private equity fund. Under the HSR Act's "ultimate parent entity" analysis, the acquiring person is determined by reference to the entity that ultimately controls the acquiring entity. The total assets of the acquiring person's ultimate parent entity (which, depending on the structure of Harrowgate's fund complex, may be HCP or an affiliated holding entity) substantially exceed the minimum total assets threshold applicable under the 2025 guidelines. Similarly, Pennfield, as the acquired person, reported annual revenue of $1.62 billion for FY 2024, which far exceeds the applicable annual net sales threshold.

Accordingly, under any applicable analysis, the filing obligation exists and both parties are required to submit HSR Act premerger notification forms.

C. Filing Fee

The HSR Act filing fee is determined by the value of the transaction under a tiered fee schedule that is adjusted periodically. Under the 2025 fee schedule, transactions valued between $500 million and $1 billion are subject to a filing fee of $280,000. Because the aggregate merger consideration of $980,000,000 falls within this tier, the applicable filing fee is $280,000.

Under the HSR Act and applicable practice, the filing fee is required to be paid by the acquiring person at the time of filing. Accordingly, HPE Fund IV (or Harrowgate, on behalf of HPE Fund IV) will be responsible for payment of the $280,000 filing fee. The fee should be paid by wire transfer to the FTC's designated account concurrently with the submission of the filing.

D. Waiting Period

The HSR Act imposes a mandatory waiting period during which the parties may not consummate the transaction. For cash tender offers, the initial waiting period is 15 calendar days; for all other transactions, including mergers, the initial waiting period is 30 calendar days. Because the proposed transaction is structured as a reverse triangular merger (not a cash tender offer), the applicable initial waiting period is 30 calendar days from the date on which both parties' notification forms are received by the FTC and the DOJ.

Based on the current transaction timeline, we anticipate that the Merger Agreement will be executed on or about April 7, 2025, and that HSR filings for both the acquiring person and the acquired person will be submitted on or about April 8, 2025. Assuming both filings are accepted as substantially compliant on the date of submission, the initial 30-day waiting period would commence on April 8, 2025, and would be expected to expire at 11:59 p.m. Eastern Time on May 8, 2025, absent early termination of the waiting period or the issuance of a second request.

With respect to early termination, the parties may request early termination of the waiting period pursuant to 15 U.S.C. § 18a(b)(2). Historically, the FTC has granted early termination for transactions that do not raise competitive concerns, often within two to three weeks of filing. However, in February 2021, the FTC suspended its longstanding practice of routinely granting early termination of HSR waiting periods, citing an increase in merger filings and resource constraints. As of the date of this memorandum, the FTC has not consistently restored the practice of granting early termination. Accordingly, while we intend to request early termination in the filing, we do not assume that early termination will be available, and the transaction timeline should be planned around the full 30-day initial waiting period.

E. Reviewing Agency

Under the interagency clearance process, one of the two federal antitrust agencies — the DOJ Antitrust Division or the FTC — is assigned primary jurisdiction to review each reported transaction. The clearance process is internal to the agencies and is not publicly disclosed; parties cannot select which agency reviews their transaction, and the agencies' clearance decisions are generally not announced.

Historically, the FTC has tended to review transactions in the retail sector, reflecting the agency's institutional expertise in consumer-facing industries. However, agency clearance is not predictable and can be influenced by workload, prior investigations, and other factors. For purposes of this memorandum, we have conducted our analysis under the assumption that either agency could review the transaction, and our conclusions apply regardless of which agency is assigned jurisdiction. The substantive analysis and risk assessment set forth below are equally applicable to both the DOJ and the FTC's merger review standards, as both agencies apply the same statutory framework (Section 7 of the Clayton Act, 15 U.S.C. § 18) and, since the release of the 2023 Merger Guidelines, operate under unified analytical guidelines.

IV. Relevant Market Analysis

A critical step in any antitrust analysis of a proposed merger or acquisition is the definition of the relevant product market and relevant geographic market. Market definition serves as the framework within which the competitive effects of a transaction are assessed. The DOJ and the FTC define relevant markets using the "hypothetical monopolist" test, which asks whether a hypothetical monopolist of a group of products in a defined geographic area could profitably impose a small but significant and non-transitory increase in price (typically 5–10%) above prevailing levels. If consumers could defeat such a price increase by substituting to products or suppliers outside the proposed market, the market is drawn too narrowly. Below, we analyze the relevant product and geographic markets applicable to the proposed transaction.

A. Relevant Product Market

1. Overview of Pennfield's Business

Pennfield operates as a specialty retailer of outdoor lifestyle products, sporting goods, and adventure apparel. The company's merchandise assortment spans a broad range of product categories catering to consumers who participate in outdoor recreation and active lifestyle pursuits. Pennfield's core product categories include:

• Outdoor and camping equipment: Tents, sleeping bags, camp stoves, coolers, lighting, and related accessories for camping, backpacking, and outdoor living;

• Hiking and trail footwear: Hiking boots, trail running shoes, sandals, and technical footwear from leading national and international brands;

• Performance apparel (men's and women's): Technical outerwear, base layers, insulation layers, rain gear, and activity-specific apparel designed for hiking, climbing, skiing, and other outdoor pursuits;

• Cycling and water sports accessories: Cycling helmets, apparel, accessories, and components, as well as kayaking, paddleboarding, and water sports gear;

• Fitness and wellness products: Yoga mats, resistance equipment, recovery tools, and other fitness-related accessories;

• Branded adventure lifestyle apparel and accessories: Casual apparel, bags, sunglasses, watches, and lifestyle accessories marketed under outdoor and adventure brands.

Pennfield competes across both brick-and-mortar retail channels (through its 209 store locations) and e-commerce channels (through its national online platform, pennfield.com). The company's stores are typically located in suburban shopping centers, lifestyle centers, and mixed-use retail developments, positioned to attract consumers with an interest in outdoor recreation and active lifestyles.

It is important to note that Pennfield is a retailer of third-party branded and private-label merchandise. The company does not manufacture products itself. Pennfield sources merchandise from a diverse base of suppliers, including well-known national and international outdoor brands, as well as contract manufacturers that produce Pennfield's proprietary private-label products. This distinction is relevant to the vertical effects analysis discussed in Section V.C below, as Pennfield's position in the value chain is that of a downstream retailer, not an upstream manufacturer or supplier.

2. Proposed Product Market Definitions

In our analysis, we have considered three plausible product market definitions, ranging from narrow to broad. The appropriate market definition depends on the analytical framework applied by the reviewing agency, but the competitive effects analysis yields the same conclusion — no competitive concern — under any of these definitions.

Narrowest plausible market: Specialty outdoor/adventure retail. This market encompasses brick-and-mortar and online retailers whose primary merchandise assortment focuses on outdoor recreation, camping, hiking, fishing, hunting, cycling, and related adventure and outdoor lifestyle categories. Retailers in this segment differentiate themselves through specialized product knowledge, curated brand assortments, and a shopping environment tailored to outdoor enthusiasts. Competitors in this segment include dedicated outdoor specialty chains, independent outdoor retailers, and online platforms focused on outdoor products. This is the most likely market definition the agencies would employ, as it captures the closest substitutes for Pennfield's retail offering and the set of competitors most directly comparable to Pennfield in terms of product assortment, brand positioning, and target customer demographics.

Broader plausible market: Sporting goods and outdoor retail. This market includes general sporting goods retailers (i.e., large-format retailers selling a full range of sporting goods, athletic apparel, and outdoor products), mass-market retailers with significant sporting goods and outdoor departments, and e-commerce pure-play competitors selling sporting goods and outdoor products. Under this broader definition, Pennfield competes not only with specialty outdoor chains but also with large general sporting goods retailers and the outdoor departments of mass-market and warehouse club retailers.

Broadest plausible market: General retail. Under the broadest conceivable market definition, Pennfield competes with all retail formats for consumer discretionary spending on apparel, footwear, and recreational goods. This definition would include department stores, off-price retailers, and general merchandise e-commerce platforms. While this market definition is unlikely to be adopted by the agencies for purposes of analyzing this transaction (as it is over-inclusive and fails to capture the competitive dynamics specific to outdoor and sporting goods retailing), we note it for completeness.

Under any of these market definitions, the market is highly fragmented and characterized by vigorous competition. Barriers to entry are relatively low, particularly in the e-commerce channel, where new entrants can reach consumers nationally without the capital investment required to establish a physical store network. Consumer switching costs are minimal, as outdoor and sporting goods consumers regularly comparison shop across multiple retailers and channels.

We believe the FTC or DOJ would most likely analyze the transaction under the narrower specialty outdoor/adventure retail market definition, as this market most closely captures the set of products and competitors that constrain Pennfield's pricing and competitive behavior. However, even under this narrowest market definition, the market remains highly fragmented with numerous competitors, and the transaction does not result in any increase in market concentration.

3. Key Competitors in Specialty Outdoor/Sporting Goods Retail

The specialty outdoor and sporting goods retail market features a large number of competitors spanning multiple business models, including national specialty chains, general sporting goods retailers, regional and independent retailers, and online marketplaces and e-commerce platforms. The competitive landscape includes, but is not limited to, the following categories of competitors:

• National specialty outdoor retailers with dedicated outdoor merchandise assortments, experiential retail formats, and multi-channel sales capabilities;

• Large-format sporting goods retailers offering a broad product range across team sports, outdoor recreation, fitness, and hunting/fishing categories;

• Mass-market retailers with significant sporting goods and outdoor departments, including big-box retailers and warehouse clubs that allocate meaningful floor space and online inventory to outdoor and sporting goods categories;

• E-commerce platforms — both general marketplace platforms and vertically focused outdoor e-commerce retailers — that provide consumers with convenient access to a wide assortment of outdoor products, often at competitive prices;

• Regional and independent outdoor retailers operating in specific geographic markets, many of which have strong local brand recognition and loyal customer bases;

• Direct-to-consumer brands that sell outdoor apparel, footwear, and equipment directly to consumers through their own online storefronts, bypassing traditional retail intermediaries.

No single competitor holds a dominant market share in the specialty outdoor/sporting goods retail market. Industry data and estimates suggest that the top five specialty outdoor and sporting goods retailers collectively account for less than 35% of total market revenue, reflecting the fragmented nature of the competitive landscape. The market is characterized by low concentration, numerous competitive alternatives for consumers, and ongoing competitive entry and expansion by both brick-and-mortar and online retailers. This competitive structure is consistent with a market in which no single acquisition — particularly one involving a financial buyer — would be expected to raise competitive concerns.

B. Relevant Geographic Market

1. National Market

Pennfield operates across 34 states through its network of 209 physical retail locations and sells to consumers nationwide through its e-commerce platform. The company's competitors similarly operate on a national basis, with both physical store networks and online sales channels that serve customers throughout the United States. Major national competitors maintain store networks spanning dozens of states and ship products to all 50 states via their e-commerce operations.

Given the national scope of competition in specialty outdoor and sporting goods retail — and the particular significance of e-commerce as a competitive channel that transcends local geographic boundaries — the relevant geographic market is properly defined as nationwide (the United States). A nationwide market definition is consistent with the approach the agencies have taken in prior retail mergers involving competitors with national store footprints and e-commerce operations.

We note that Pennfield has no foreign operations. The company does not operate retail locations outside the United States, and its international online sales are not material to its business. Accordingly, no non-U.S. geographic markets are relevant to this analysis, and no non-U.S. merger control filings have been identified as required (as discussed further in Section VII below).

2. Local/Regional Market Considerations

Although the primary relevant geographic market for this analysis is national, we have also considered whether the transaction could raise competitive concerns in local or regional geographic markets. In retail merger analysis, the agencies sometimes examine competition at the local level, particularly when the merging parties operate competing stores in overlapping trade areas (e.g., within the same metropolitan statistical area ("MSA") or within a specified drive-time radius).

In this case, however, a local market analysis does not alter our conclusions. Pennfield's 209 store locations are distributed across 34 states, resulting in a diffuse geographic footprint with no significant concentration of stores in any single metropolitan area or region. In each local market where Pennfield operates a store, consumers have access to multiple competing retailers, including national chains, regional independents, and online alternatives. Moreover, because HPE Fund IV is a financial buyer and does not own any competing retail operations, the transaction does not eliminate a competitor in any local market. There are no overlapping stores to analyze, and the competitive dynamics in each local market where Pennfield is present will be unchanged by the transaction.

Accordingly, neither a national nor a local geographic market analysis gives rise to any competitive concern.

V. Competitive Effects Analysis

Having defined the relevant product and geographic markets, we now turn to an assessment of the competitive effects of the proposed transaction. The analysis considers horizontal effects (including market concentration and overlap), vertical effects, potential competition and conglomerate effects, coordinated effects, and buyer-side market power. In each case, we conclude that the transaction does not give rise to competitive concerns that would support an enforcement action.

A. Market Concentration

The specialty outdoor and sporting goods retail market is characterized by low concentration, whether measured at the national or local level. The market supports a large number of competitors across multiple formats and channels, and no single firm holds a dominant competitive position.

Pennfield's estimated national market share in the specialty outdoor retail market is approximately 3–5%, based on FY 2024 revenue of $1.62 billion in a market estimated at approximately $35–50 billion in total size, depending on the precise market definition employed. Under the broader sporting goods and outdoor retail market definition, Pennfield's market share is correspondingly lower. Under any reasonable market definition, Pennfield is a modest participant in a large and competitive market.

A critical consideration in this analysis is the nature of the acquiring party. HPE Fund IV is a financial buyer — a private equity fund — rather than an operating competitor in the specialty outdoor or sporting goods retail market. When a financial buyer acquires a company, the transaction does not, by itself, increase market concentration, because no competitor is eliminated from the market. The surviving entity (Pennfield) will continue to operate as a standalone retailer, competing against the same set of competitors as before the transaction, albeit under new ownership. The HHI (Herfindahl-Hirschman Index), which is the standard measure of market concentration used by the DOJ and FTC, would not change as a result of this transaction in the specialty outdoor/sporting goods retail market, because no horizontal competitor is being absorbed.

The agencies could, however, examine whether the acquiring financial buyer's existing portfolio companies create a de facto horizontal overlap with the target. We address that question in the following section.

B. Horizontal Overlap Analysis — Harrowgate Portfolio Review

The principal competitive concern in a private equity acquisition arises when the financial sponsor's existing portfolio includes one or more companies that compete with the target in the same relevant product and geographic markets. In such cases, the agencies may analyze the combined competitive effect of the portfolio company and the target under common ownership, applying the same framework used for horizontal mergers between operating companies.

To assess this risk, we conducted a comprehensive review of the entire investment portfolio of Harrowgate Capital Partners LLC, encompassing all four flagship private equity funds (Funds I through IV) and all associated co-investment vehicles. This review was conducted in coordination with the Harrowgate deal team and was based on portfolio information provided by Rebecca Talmadge and Jonah Whitfield.

Harrowgate Capital Partners LLC manages approximately $14.2 billion in total assets under management. The firm's investment strategy focuses on mid-market consumer and specialty retail businesses. As of the date of this memorandum, Harrowgate's portfolio across all funds includes companies operating in the following retail verticals:

• Home furnishings and décor retail;

• Personal care and beauty retail;

• Specialty food and beverage retail;

• Pet products retail and distribution;

• Children's apparel and accessories retail.

None of these portfolio companies operates in the specialty outdoor, sporting goods, or adventure retail segment or in any directly adjacent product market that would create a cognizable horizontal overlap with Pennfield's business lines. Each of Harrowgate's existing consumer and retail portfolio companies competes in distinct retail verticals with different product assortments, different customer demographics, different supplier bases, and different competitive dynamics than the specialty outdoor and sporting goods market in which Pennfield operates.

Furthermore, we found no material product or customer overlap between any Harrowgate portfolio company and Pennfield. Pennfield's merchandise — outdoor equipment, performance apparel, hiking footwear, cycling and water sports accessories, and adventure lifestyle products — does not overlap with the product categories sold by Harrowgate's home furnishings, personal care, specialty food, pet products, or children's apparel portfolio companies. Consumers do not substitute between these categories, and the suppliers and brands from which these businesses source their merchandise are different.

HPE Fund IV's current portfolio (Fund IV, vintage 2023) was separately reviewed and confirmed to contain no companies with any competitive nexus to Pennfield. HPE Fund IV's investments to date have been in sectors unrelated to outdoor and sporting goods retail.

Conclusion: There are no "2(a)" (portfolio company) competition concerns. The transaction does not create a horizontal overlap between Pennfield and any existing Harrowgate portfolio company under any plausible market definition, and the agencies have no basis on which to pursue a horizontal theory of competitive harm.

C. Vertical Effects

Vertical theories of competitive harm arise when a merger combines firms at different levels of the supply chain (e.g., a merger between a supplier and a retailer, or between a manufacturer and a distributor) and the combined firm has the ability and incentive to foreclose competitors from access to an essential input or an important distribution channel.

In the present transaction, vertical concerns are not present for the following reasons:

• Pennfield is a downstream retailer, not an upstream manufacturer or supplier. Pennfield purchases merchandise from third-party brands and contract manufacturers and resells that merchandise through its stores and e-commerce platform. Pennfield does not manufacture products, does not own or operate production facilities, and does not control any critical input in the outdoor/sporting goods supply chain.

• Harrowgate does not own or control any suppliers, distributors, manufacturers, or other businesses operating at upstream or midstream levels of the outdoor or sporting goods supply chain. No Harrowgate portfolio company supplies products to Pennfield or to Pennfield's competitors.

• No input foreclosure concern arises, because the combined entity would not control an input that competitors need. The transaction does not give Pennfield (or its new financial sponsor) the ability to deny competitors access to any essential product, brand, or supply source.

• No customer foreclosure concern arises, because Pennfield, even post-acquisition, will represent only a small fraction of total retail distribution for any outdoor or sporting goods brand. Pennfield's estimated market share of 3–5% means that suppliers will continue to have access to numerous alternative retail channels.

Accordingly, the transaction raises no vertical integration concerns, and no foreclosure theories — whether characterized as input foreclosure or customer foreclosure — are applicable.

D. Potential Competition / Conglomerate Effects

The agencies may also consider whether a merger eliminates potential competition — that is, whether the acquiring firm was a likely future entrant into the target's market, such that the acquisition eliminates the competitive pressure that the acquiring firm's potential entry would have exerted.

This theory is inapplicable here. Harrowgate is a financial buyer with no plans, capabilities, or realistic prospects of entering the specialty outdoor retail market de novo absent this acquisition. Harrowgate is an investment management firm, not a retailer. It does not operate retail businesses directly and enters retail markets only through portfolio investments. The notion that Harrowgate would independently develop a specialty outdoor retail platform in competition with Pennfield is not supported by any evidence and does not meet the demanding standard for a potential competition claim, which requires a showing that (i) the acquiring firm had the ability and incentive to enter the market independently, (ii) independent entry was likely in the near future, and (iii) independent entry would have had a pro-competitive effect.

Additionally, no conglomerate effects or portfolio power concerns are present. The acquisition does not enable tying, bundling, or cross-subsidization strategies that would harm competition. Pennfield's products (outdoor and sporting goods) are not complements to any products sold by Harrowgate's existing portfolio companies, and there is no basis for a theory that common ownership of unrelated retail businesses would confer competitive advantages that harm rivals.

E. Coordinated Effects

The agencies also assess whether a merger increases the likelihood of coordinated behavior among remaining competitors — that is, whether the post-merger market structure would facilitate tacit or explicit coordination on prices, output, or other competitive dimensions.

The specialty outdoor/sporting goods retail market exhibits characteristics that make coordinated behavior implausible:

• The market is highly fragmented, with numerous competitors of varying sizes, business models, and cost structures;

• Product offerings are differentiated across retailers, with each competitor carrying a distinct assortment of brands, private-label products, and merchandise categories;

• Pricing is highly transparent to consumers (particularly through online channels), making it difficult for competitors to sustain supra-competitive prices without losing sales to rivals;

• Barriers to entry are relatively low, particularly in the e-commerce channel, meaning that any attempt at coordinated price increases would attract competitive entry;

• The market includes a diverse mix of competitor types — specialty chains, general sporting goods retailers, mass merchants, e-commerce platforms, and independent retailers — making coordination across such a heterogeneous group of firms implausible.

The proposed transaction does not change the market structure in a manner that would facilitate coordination among remaining competitors. The number of competitors in the market is unchanged by the transaction (because the acquiring party is a financial buyer, not a competitor), and the competitive dynamics of the market will remain unaltered post-closing.

F. Buyer Power / Monopsony

Finally, we have considered whether the transaction raises concerns about buyer-side market power (monopsony), which would occur if the combined entity had the ability to depress prices paid to upstream suppliers below competitive levels.

Pennfield purchases merchandise from a large and diverse base of suppliers. No single supplier accounts for a dominant share of Pennfield's cost of goods sold, and Pennfield's purchases represent a small fraction of total industry demand for any individual brand or product category. Post-acquisition, Pennfield will continue to be one of many retail customers for its suppliers, and the change in ownership from public shareholders to a private equity sponsor does not alter Pennfield's purchasing practices, supplier relationships, or bargaining position in any material way.

Accordingly, the transaction does not create buyer-side market power that would harm upstream competition or raise monopsony concerns.

VI. Assessment of Enforcement Risk

A. DOJ/FTC Challenge Likelihood

Based on the comprehensive analysis set forth in the preceding sections, we assess the risk of a substantive antitrust challenge to the proposed transaction as low. Specifically:

• Estimated probability of a second request: Less than 5%.

• Estimated probability of an enforcement action (including a complaint, consent decree, or requirement for divestitures or other structural remedies): Negligible.

The principal factors supporting this assessment are as follows. First, the transaction involves a financial buyer acquiring a target in a highly fragmented market. Private equity acquisitions in fragmented retail markets have historically received favorable treatment from the agencies during HSR review, provided that the sponsor's existing portfolio does not create horizontal overlaps with the target's business. Second, Harrowgate's portfolio contains no companies with meaningful competitive overlap with Pennfield, eliminating the most common basis for antitrust scrutiny of private equity transactions. Third, the market is characterized by low concentration, numerous competitors across multiple channels, low barriers to entry, and low consumer switching costs — all factors that weigh heavily against an enforcement action. Fourth, no vertical, conglomerate, or coordinated effects concerns are present.

Historical precedent reinforces this assessment. Private equity acquisitions of specialty retailers in fragmented markets have generally cleared HSR review without a second request, absent portfolio overlap, unusual market circumstances, or serial acquisition patterns. We are not aware of any recent enforcement action by the DOJ or FTC involving a financial buyer's acquisition of a specialty outdoor or sporting goods retailer in the absence of horizontal overlap.

B. Second Request Risk

A second request — formally known as a request for additional information and documentary material pursuant to 15 U.S.C. § 18a(e) — is the primary enforcement tool available to the agencies during the HSR waiting period. Issuance of a second request extends the waiting period until the parties have substantially complied with the request and an additional period (typically 30 days for mergers) has elapsed. Second requests are resource-intensive, often requiring the production of millions of documents and the preparation of detailed data submissions. Compliance with a second request typically requires four to six months, depending on the scope of the request and the volume of responsive materials.

Given the absence of competitive overlaps and the highly fragmented nature of the relevant market, we assess the likelihood of a second request as very low — less than 5%. In our experience, the agencies are most likely to issue second requests in transactions that present material horizontal overlaps, significant market concentration, or novel competitive theories that warrant further investigation. None of those circumstances is present here.

In the unlikely event that a second request is issued, the parties would have adequate time to respond within the transaction's contractual timeline. The Merger Agreement's Outside Date of September 30, 2025 — approximately six months from the expected signing date of April 7, 2025 — provides a sufficient time horizon to accommodate second request compliance, even under conservative assumptions regarding the pace of document production and review. However, a second request would likely delay closing beyond the currently estimated closing date of approximately June 30, 2025, and would impose significant additional costs in the form of document review, data compilation, and related legal fees.

The Merger Agreement provides that the closing of the transaction is conditioned on the expiration or early termination of the HSR Act waiting period. The 15-business-day marketing period that runs following execution of the Merger Agreement (during which the debt financing syndication will be conducted) operates independently of the HSR timeline and does not extend or interact with the HSR waiting period.

C. State Attorney General Risk

In addition to federal antitrust review under the HSR Act, state attorneys general have independent authority to review mergers and acquisitions for competitive effects within their respective states, typically under state antitrust statutes or the parens patriae provisions of the Clayton Act (15 U.S.C. § 15c). Several state attorneys general have been active in recent years in challenging mergers, particularly in the healthcare, technology, and agricultural sectors.

We assess the risk of a state-level antitrust challenge to the proposed transaction as negligible. The absence of competitive concerns at the national level makes it unlikely that any state attorney general would identify state-specific competitive harms sufficient to justify an enforcement action. Moreover, Pennfield's geographic footprint is diffuse, spanning 34 states, with no significant concentration of stores in any single state. Each state in which Pennfield operates features multiple competing retailers of outdoor and sporting goods, and the acquisition does not alter the competitive conditions in any state or local market. We are not aware of any pending state-level investigation or inquiry related to either Pennfield or Harrowgate that would suggest heightened state-level scrutiny of this transaction.

VII. Non-U.S. Merger Control Filings

We have conducted a jurisdictional analysis to determine whether the proposed transaction triggers mandatory merger control notification requirements in any jurisdiction outside the United States. The analysis examined the filing thresholds and jurisdictional requirements of all major non-U.S. merger control regimes, including, without limitation, the European Union (under the EU Merger Regulation), the United Kingdom (under the Enterprise Act 2002), Canada (under the Competition Act), Australia (under the Competition and Consumer Act 2010), the People's Republic of China (under the Anti-Monopoly Law), Japan (under the Act on Prohibition of Private Monopolization), Germany (under the Act against Restraints of Competition), and other significant jurisdictions.

Based on this analysis, no non-U.S. merger control filings have been identified as required. The principal reason is that Pennfield has no foreign operations, no international retail locations, and no material international revenue. Pennfield's business is conducted entirely within the United States, and its e-commerce platform does not generate meaningful international sales. Accordingly, the transaction does not meet the local nexus, turnover, or market share thresholds that trigger mandatory notification requirements in any non-U.S. jurisdiction.

This conclusion has been confirmed through a comprehensive review of Pennfield's revenue and asset data against the applicable jurisdictional thresholds in each relevant jurisdiction. We will continue to monitor this analysis in the event that any new information regarding Pennfield's international revenue or operations comes to light prior to the filing date, but we do not anticipate any change to this conclusion.

VIII. Recommendations

Based on the analysis set forth in this memorandum, we make the following recommendations to the deal team and the client.

A. Filing Strategy

We recommend that the parties proceed with HSR Act premerger notification filings on or about April 8, 2025, the day following the expected execution of the Merger Agreement on April 7, 2025. Prompt filing will ensure that the 30-day initial waiting period begins as early as possible, minimizing potential delays to the anticipated closing timeline.

The $280,000 filing fee should be paid by wire transfer to the FTC's designated account concurrently with the filing submission. Our office will coordinate the wire transfer instructions with the Harrowgate deal team and provide the necessary FTC banking details.

We further recommend that the parties request early termination of the waiting period in their respective HSR filings. Although the likelihood of the FTC granting early termination remains uncertain given the agency's suspension of the practice since February 2021, there is no downside to making the request, and if early termination is granted, it could accelerate the timeline to closing by up to several weeks.

In preparing the filings, we will need to compile and produce all documents responsive to Items 4(c) and 4(d) of the HSR Notification and Report Form. Item 4(c) requires the production of documents prepared by or for any officer or director of the filing person (or, in the case of an unincorporated entity, comparable officials) that analyze the transaction with respect to competition, competitors, market shares, potential for sales growth, or expansion into new product or geographic markets. Item 4(d) requires production of certain confidential information memoranda, studies, surveys, analyses, and reports prepared by investment bankers, consultants, or other third-party advisors that analyze the transaction with respect to market shares, competition, competitors, or potential for growth or expansion. The scope of responsive documents will include materials from the Project Summit data room, internal Harrowgate investment committee memoranda and presentations, and any financial advisor materials prepared by Ridgepoint Partners LLC in connection with the transaction. Review of these materials should be coordinated promptly between Ryan Kowalski, Megan Chu, and our antitrust team to ensure timely completion of the filing.

B. Document Preparation

We recommend the following steps for preparing the HSR filing forms and associated document productions:

(1) Acquiring person filing (HPE Fund IV / Harrowgate): Our team will prepare the HSR Notification and Report Form for the acquiring person, in coordination with the Harrowgate deal team and Ridgepoint Partners LLC (Marcus Hale, Priya Chandrasekaran). We will need to collect and review all potentially responsive 4(c) and 4(d) documents from Harrowgate's investment committee files, deal team files, and Ridgepoint's financial advisor files. A document hold notice should be issued to all relevant individuals at Harrowgate and Ridgepoint promptly upon execution of the Merger Agreement.

(2) Acquired person filing (Pennfield): Pennfield, as the acquired person, is also required to submit an HSR Notification and Report Form. Pennfield's filing will be prepared in coordination with Pennfield's outside counsel, Calloway, Briggs & Harmon LLP (Janet Alcorn). We will liaise with Ms. Alcorn to ensure that both filings are submitted simultaneously and are consistent in their description of the transaction and the parties.

(3) Narrative submission: We will draft a narrative description of the transaction and competitive analysis for inclusion in the HSR filing. The narrative will describe the transaction structure, the relevant markets, the competitive landscape, and the basis for our conclusion that the transaction does not raise competitive concerns. A well-crafted narrative can facilitate the agencies' review and reduce the likelihood of follow-up inquiries.

C. Coordination with Merger Agreement

The Merger Agreement includes the expiration or early termination of the HSR Act waiting period as a mutual condition to closing. This is a standard provision in transactions subject to HSR review and ensures that neither party is obligated to close the transaction until antitrust clearance has been obtained.

The Merger Agreement's marketing period of 15 business days runs from the execution date of the Merger Agreement and is designed to provide time for the syndication of the committed debt financing. This marketing period operates independently from the HSR timeline. The marketing period is expected to conclude prior to the expiration of the HSR waiting period, and accordingly, the HSR waiting period is expected to be the binding timeline constraint for closing.

The Outside Date under the Merger Agreement is September 30, 2025, providing approximately six months from the expected signing date. This timeline provides ample cushion even in the unlikely event of a second request. If the initial waiting period expires without a second request on or about May 8, 2025, and all other conditions to closing are satisfied, the transaction could close as early as late May or early June 2025, subject to the satisfaction of remaining conditions and the logistics of closing.

We note that the Merger Agreement does not include a "hell-or-high-water" provision — that is, a provision requiring the buyer to take any and all actions necessary to obtain antitrust clearance, including agreeing to divestitures or other structural remedies. The absence of such a provision is appropriate given our low risk assessment. In the context of the current negotiation, we do not expect the inclusion of a hell-or-high-water provision to become a point of contention, as the parties and their respective advisors appear aligned in their assessment that the transaction presents no material antitrust risk.

D. Monitoring

Although the antitrust risk associated with this transaction is low, we recommend ongoing monitoring of certain developments that could affect the regulatory landscape:

• FTC/DOJ enforcement priorities. The current enforcement environment has seen heightened scrutiny of private equity acquisitions, particularly in sectors where financial sponsors have engaged in serial acquisition strategies (so-called "roll-up" strategies). Recent enforcement actions and public statements by FTC and DOJ leadership have signaled increased attention to the competitive effects of private equity ownership, including concerns about the accumulation of market share through successive add-on acquisitions within a single platform. However, the proposed Pennfield transaction is distinguishable from these roll-up concerns: it involves a single, standalone acquisition of a specialty retailer with no existing portfolio overlap, and Harrowgate is not pursuing a consolidation strategy in the outdoor/sporting goods sector. We do not believe the current enforcement posture toward private equity roll-ups should alter our risk assessment, but we will continue to monitor developments.

• Policy changes. We will monitor for any changes in the HSR Act, HSR Rules, or the agencies' merger review practices that could affect the filing process or timeline. The FTC's recent amendments to the HSR Notification and Report Form, which took effect in 2025, have expanded the scope of information required in filings; our team is fully familiar with the revised form requirements and will prepare the filings in compliance with the current rules.

• Industry-specific developments. We will monitor for any industry-specific developments — such as a competing transaction in the outdoor/sporting goods retail sector, or an agency investigation involving market participants — that could affect the agencies' interest in reviewing this transaction.

IX. Conclusion

The proposed acquisition of Pennfield Holdings, Inc. by Harrowgate Private Equity Fund IV LP presents low substantive antitrust risk. The specialty outdoor and sporting goods retail market in which Pennfield operates is highly fragmented, characterized by numerous national, regional, and online competitors, low concentration, and vigorous competition. Pennfield holds a modest estimated market share of approximately 3–5% under the narrowest plausible market definition. Harrowgate's existing investment portfolio, spanning all four flagship funds and associated co-investment vehicles, contains no companies with horizontal overlap in Pennfield's product markets. No vertical, conglomerate, or coordinated effects concerns have been identified.

The HSR Act filing should proceed on the anticipated timeline, with submission of both the acquiring person and acquired person notification forms on or about April 8, 2025. The initial 30-day waiting period is expected to expire on or about May 8, 2025, assuming no early termination is granted and no second request is issued. The probability of a second request is estimated at less than 5%, and the probability of a substantive enforcement action is negligible.

We recommend proceeding with the transaction without antitrust-related structural remedies, divestitures, or hold-separate commitments. No modifications to the transaction structure are necessary from an antitrust perspective, and we do not anticipate that the HSR filing process will present an impediment to closing the transaction on the anticipated timeline.

We are available to discuss this assessment in further detail with the deal team and the client at their earliest convenience, and we will work closely with Ryan Kowalski and Megan Chu in the coming days to begin preparation of the HSR filing forms and the associated 4(c)/4(d) document collection.

X. Contact Information

Questions regarding this memorandum or the HSR filing process should be directed to:

Elaine Forsythe Specialist Partner, Antitrust & Competition Calderwood & Harkness LLP One Liberty Plaza, 55th Floor New York, NY 10006 Telephone: (212) 555-4820

Email: eforsythe@calderwoodharkness.com

Elaine Forsythe is available to discuss this assessment with the deal team and the client at their convenience. She will coordinate directly with Ryan Kowalski and Megan Chu on HSR filing preparation, 4(c)/4(d) document collection and review, and any related antitrust matters arising in connection with the transaction.

This memorandum is a privileged and confidential at

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP One Liberty Plaza, 55th Floor New York, NY 10006
MEMORANDUM
To: Oliver Mackenzie, Responsible Partner, Mergers & Acquisitions, Calderwood & Harkness LLP
Cc: Harrison Wexford, Billing Partner, M&A, Calderwood & Harkness LLP Ryan Kowalski, Lead Associate, M&A, Calderwood & Harkness LLP Megan Chu, Working Associate, M&A, Calderwood & Harkness LLP Rebecca Talmadge, Partner, Head of Consumer & Retail, Harrowgate Capital Partners LLC Jonah Whitfield, Principal, Deal Lead, Harrowgate Capital Partners LLC
From: Elaine Forsythe, Specialist Partner, Antitrust & Competition, Calderwood & Harkness LLP
Date: April 2, 2025
Re: Antitrust Risk Assessment — Proposed Acquisition of Pennfield Holdings, Inc. (Nasdaq: PNFD) by Harrowgate Private Equity Fund IV LP (Project Summit)
C&H Matter No.: 1003-00004
I. Executive Summary
The purpose of this memorandum is to assess the substantive antitrust risks associated with the proposed acquisition of Pennfield Holdings, Inc. ("Pennfield" or the "Target"), a publicly traded specialty retailer of outdoor lifestyle products, sporting goods, and adventure apparel, by Harrowgate Private Equity Fund IV LP ("HPE Fund IV" or the "Buyer"), a private equity fund managed by Harrowgate Capital Partners LLC ("HCP" or "Harrowgate"). The proposed transaction involves a take-private acquisition for an aggregate merger consideration of approximately $980,000,000, to be structured as a reverse triangular merger in which Pinnacle Merger Sub, Inc. ("Merger Sub"), a newly formed wholly owned subsidiary of HPE Fund IV, will merge with and into Pennfield, with Pennfield surviving as a wholly owned subsidiary of HPE Fund IV.
Based on our analysis of the competitive landscape, market structure, and the composition of Harrowgate's existing investment portfolio, we conclude that the proposed transaction presents low antitrust risk and is unlikely to draw a substantive challenge from either the Antitrust Division of the United States Department of Justice (the "DOJ") or the Federal Trade Commission (the "FTC"). The principal reasons supporting this conclusion are as follows:
(1) The specialty outdoor and sporting goods retail market in which Pennfield operates is highly fragmented, characterized by numerous national, regional, and online competitors, with no single firm holding a dominant market position. Under any plausible market definition, the market exhibits low concentration and vigorous competition.
(2) Harrowgate's existing investment portfolio — across all four flagship funds and associated co-investment vehicles — contains no companies with meaningful horizontal overlap in the relevant product or geographic markets in which Pennfield competes. HPE Fund IV is a financial buyer, and the transaction does not combine two competing businesses.
(3) No vertical integration concerns are present. Pennfield is a retailer, not a manufacturer or supplier, and Harrowgate does not own or control any businesses operating in the outdoor and sporting goods supply chain.
(4) The transaction does not result in a material increase in market concentration under any plausible market definition. Pennfield's estimated national market share in the specialty outdoor retail segment is approximately 3–5%, and the acquisition by a financial sponsor does not alter the competitive structure of the market.
The transaction is subject to the premerger notification and reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), 15 U.S.C. § 18a, and the implementing rules promulgated thereunder, 16 C.F.R. §§ 801–803. An HSR Act filing is required because the aggregate merger consideration of $980,000,000 exceeds the 2025 size-of-transaction threshold of $119.5 million. The applicable filing fee for transactions valued between $500 million and $1 billion under the 2025 fee schedule is $280,000. We anticipate making the HSR filing on or about April 8, 2025, the day following the expected execution of the Merger Agreement on April 7, 2025. The initial 30-calendar-day waiting period is expected to expire on or about May 8, 2025, assuming no early termination is granted and no second request is issued.
We assess the likelihood of a second request (a formal request for additional information and documentary material pursuant to 15 U.S.C. § 18a(e)) as very low, estimated at less than 5%. The probability of an enforcement action or consent decree requiring divestitures or other structural remedies is negligible. We recommend proceeding with the HSR filing on the anticipated timeline without the need for antitrust-related structural remedies, divestitures, or hold-separate commitments.
The balance of this memorandum sets forth the factual and analytical basis for this assessment.
II. Transaction Overview
A. Parties
Buyer. The acquiring entity is Harrowgate Private Equity Fund IV LP, a Delaware limited partnership formed in 2023 for the purpose of making private equity investments primarily in mid-market consumer and specialty retail businesses. HPE Fund IV's general partner is Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company. The investment manager and sponsor of HPE Fund IV is Harrowgate Capital Partners LLC, a Delaware limited liability company headquartered at 1200 Market Street, Suite 3100, Wilmington, Delaware 19801. HPE Fund IV has aggregate capital commitments of $4.8 billion (2023 vintage). Harrowgate Capital Partners LLC manages approximately $14.2 billion in total assets under management across four flagship private equity funds (Funds I through IV) and associated co-investment vehicles. Harrowgate's investment strategy focuses on mid-market consumer and specialty retail businesses with strong brand equity, fragmented competitive landscapes, and significant e-commerce acceleration opportunities. The firm has a demonstrated track record of partnering with management teams to drive value creation through operational improvements, digital transformation, and selective add-on acquisitions within its portfolio platforms.
Target. Pennfield Holdings, Inc. is a Delaware corporation whose common stock is publicly traded on the Nasdaq Global Select Market under the ticker symbol "PNFD." Pennfield is a leading specialty retailer focused on outdoor lifestyle, sporting goods, and adventure apparel. The company operates 187 company-owned full-format store locations across 34 states and 22 outlet store locations, for a total of 209 physical retail locations. In addition to its brick-and-mortar presence, Pennfield operates a national e-commerce platform that accounts for a growing percentage of total revenue. Pennfield employs approximately 8,400 associates across its corporate headquarters, distribution centers, and retail locations. The company's headquarters are located at 4500 Commerce Boulevard, Suite 800, Charlotte, North Carolina 28202. Pennfield's senior management team is led by Chief Executive Officer Catherine Langford, Chief Financial Officer Derek Simmons, and Chief Operating Officer Maxwell Dunn, each of whom is expected to continue with the company following the closing of the transaction and to participate in a management rollover equity program.
Merger Sub. Pinnacle Merger Sub, Inc. is a newly formed Delaware corporation and wholly owned subsidiary of HPE Fund IV, organized solely for the purpose of effectuating the proposed transaction. Merger Sub has not conducted any business activities, has no employees, and has no assets or liabilities other than those incidental to its formation and the transactions contemplated by the Merger Agreement.
B. Transaction Structure
The proposed transaction is structured as a reverse triangular merger under Section 251 of the Delaware General Corporation Law ("DGCL"). Pursuant to the terms of the Agreement and Plan of Merger (the "Merger Agreement"), expected to be executed on or about April 7, 2025, Pinnacle Merger Sub will merge with and into Pennfield (the "Merger"), with Pennfield surviving the Merger as a wholly owned subsidiary of HPE Fund IV. Upon consummation of the Merger, the separate corporate existence of Pinnacle Merger Sub will cease, and Pennfield will continue as the surviving corporation.
The aggregate merger consideration is $980,000,000. Each outstanding share of Pennfield common stock (other than shares owned by Pennfield, HPE Fund IV, or Merger Sub, and shares held by stockholders who validly exercise and perfect appraisal rights under DGCL § 262) will be converted into the right to receive $15.95 per share in cash, without interest and subject to applicable withholding taxes. The per-share merger consideration was determined on a fully diluted basis, reflecting 61,450,000 fully diluted shares outstanding, consisting of approximately 58,200,000 basic shares of common stock outstanding and approximately 3,250,000 shares issuable upon the exercise or settlement of outstanding stock options, restricted stock units ("RSUs"), and other equity-based awards under Pennfield's equity compensation plans. In-the-money stock options will be cancelled at closing in exchange for a cash payment equal to the excess of the per-share merger consideration over the applicable exercise price, and outstanding RSUs will vest and be settled in cash at the per-share merger consideration.
The per-share merger consideration of $15.95 represents a premium of approximately 30.95% to Pennfield's 30-day volume-weighted average price ("VWAP") of $12.18 as of the undisturbed date, and a premium of approximately 10.0% to Pennfield's 52-week high closing price of $14.50. On an enterprise value basis, the transaction implies an EV/EBITDA multiple of approximately 6.9x based on Pennfield's fiscal year 2024 EBITDA of $142 million.
C. Pennfield Financial Profile
Pennfield's financial performance for the most recently completed fiscal year is summarized below. Pennfield operates on a retail fiscal calendar, with its fiscal year ending on January 31 of each year. Accordingly, references to "FY 2024" refer to the fiscal year ended January 31, 2025.
Pennfield's revenue base is diversified across product categories and geographic regions, with no single product category or state accounting for a disproportionate share of total revenue. The company's revenue mix is approximately 65% brick-and-mortar retail, 30% e-commerce, and 5% outlet sales, reflecting a multi-channel retail strategy. Pennfield's financial profile is consistent with a well-established mid-market specialty retailer operating in a competitive and dynamic retail environment.
D. Financing Overview
The proposed transaction will be financed through a combination of committed debt facilities, sponsor equity, co-investor equity, management rollover equity, and available cash on the Target's balance sheet. The financing structure is summarized below:
The Senior Secured Term Loan B and the Senior Secured Revolving Credit Facility are being provided pursuant to committed debt financing letters from Falconer National Bank, N.A. and Dunmore Capital Markets LLC, copies of which have been provided to the M&A deal team. The Revolving Credit Facility is expected to be undrawn at closing and will be available for working capital and general corporate purposes of the surviving company post-closing. Ashford Growth Partners LP, a growth equity and co-investment fund, will contribute $60 million of co-investor equity alongside HPE Fund IV's commitment. Members of Pennfield's senior management team, including CEO Catherine Langford, CFO Derek Simmons, and COO Maxwell Dunn, will collectively roll over approximately $21.5 million of their existing equity in Pennfield into equity in the post-closing parent holding company structure, demonstrating their continued commitment to the business and alignment with Harrowgate as the new sponsor.
The financing structure does not raise antitrust or competition concerns. The debt financing does not involve any lender with a competing retail interest that would create a conflict, and the co-investment by Ashford Growth Partners LP does not introduce any horizontal overlap, as Ashford's portfolio does not include specialty outdoor or sporting goods retail businesses.
III. HSR Act Filing Requirements
A. Size-of-Transaction Test
Under the HSR Act and its implementing regulations, notification to the FTC and the DOJ is required before certain acquisitions that satisfy specified jurisdictional thresholds can be consummated. The primary jurisdictional threshold is the size-of-transaction test, which requires that, as a result of the transaction, the acquiring person will hold an aggregate amount of voting securities and assets of the acquired person valued in excess of the applicable threshold. The size-of-transaction threshold is adjusted annually for changes in the gross national product; for transactions closing in 2025, the threshold is $119.5 million.
The aggregate merger consideration for the proposed acquisition is $980,000,000. This amount substantially exceeds the 2025 size-of-transaction threshold of $119.5 million. Moreover, the transaction value of $980 million also exceeds the higher threshold of $478 million, which is significant because transactions valued above that threshold are reportable regardless of whether the parties satisfy the size-of-person test. Accordingly, the filing obligation is triggered under the size-of-transaction test alone, and an HSR Act premerger notification filing is required.
B. Size-of-Person Test
Although the size-of-person test need not be satisfied for transactions valued in excess of $478 million (as discussed above), we note for completeness that both parties would independently satisfy the applicable size-of-person thresholds even if such analysis were required.
With respect to the acquiring person, HPE Fund IV is a $4.8 billion private equity fund. Under the HSR Act's "ultimate parent entity" analysis, the acquiring person is determined by reference to the entity that ultimately controls the acquiring entity. The total assets of the acquiring person's ultimate parent entity (which, depending on the structure of Harrowgate's fund complex, may be HCP or an affiliated holding entity) substantially exceed the minimum total assets threshold applicable under the 2025 guidelines. Similarly, Pennfield, as the acquired person, reported annual revenue of $1.62 billion for FY 2024, which far exceeds the applicable annual net sales threshold.
Accordingly, under any applicable analysis, the filing obligation exists and both parties are required to submit HSR Act premerger notification forms.
C. Filing Fee
The HSR Act filing fee is determined by the value of the transaction under a tiered fee schedule that is adjusted periodically. Under the 2025 fee schedule, transactions valued between $500 million and $1 billion are subject to a filing fee of $280,000. Because the aggregate merger consideration of $980,000,000 falls within this tier, the applicable filing fee is $280,000.
Under the HSR Act and applicable practice, the filing fee is required to be paid by the acquiring person at the time of filing. Accordingly, HPE Fund IV (or Harrowgate, on behalf of HPE Fund IV) will be responsible for payment of the $280,000 filing fee. The fee should be paid by wire transfer to the FTC's designated account concurrently with the submission of the filing.
D. Waiting Period
The HSR Act imposes a mandatory waiting period during which the parties may not consummate the transaction. For cash tender offers, the initial waiting period is 15 calendar days; for all other transactions, including mergers, the initial waiting period is 30 calendar days. Because the proposed transaction is structured as a reverse triangular merger (not a cash tender offer), the applicable initial waiting period is 30 calendar days from the date on which both parties' notification forms are received by the FTC and the DOJ.
Based on the current transaction timeline, we anticipate that the Merger Agreement will be executed on or about April 7, 2025, and that HSR filings for both the acquiring person and the acquired person will be submitted on or about April 8, 2025. Assuming both filings are accepted as substantially compliant on the date of submission, the initial 30-day waiting period would commence on April 8, 2025, and would be expected to expire at 11:59 p.m. Eastern Time on May 8, 2025, absent early termination of the waiting period or the issuance of a second request.
With respect to early termination, the parties may request early termination of the waiting period pursuant to 15 U.S.C. § 18a(b)(2). Historically, the FTC has granted early termination for transactions that do not raise competitive concerns, often within two to three weeks of filing. However, in February 2021, the FTC suspended its longstanding practice of routinely granting early termination of HSR waiting periods, citing an increase in merger filings and resource constraints. As of the date of this memorandum, the FTC has not consistently restored the practice of granting early termination. Accordingly, while we intend to request early termination in the filing, we do not assume that early termination will be available, and the transaction timeline should be planned around the full 30-day initial waiting period.
E. Reviewing Agency
Under the interagency clearance process, one of the two federal antitrust agencies — the DOJ Antitrust Division or the FTC — is assigned primary jurisdiction to review each reported transaction. The clearance process is internal to the agencies and is not publicly disclosed; parties cannot select which agency reviews their transaction, and the agencies' clearance decisions are generally not announced.
Historically, the FTC has tended to review transactions in the retail sector, reflecting the agency's institutional expertise in consumer-facing industries. However, agency clearance is not predictable and can be influenced by workload, prior investigations, and other factors. For purposes of this memorandum, we have conducted our analysis under the assumption that either agency could review the transaction, and our conclusions apply regardless of which agency is assigned jurisdiction. The substantive analysis and risk assessment set forth below are equally applicable to both the DOJ and the FTC's merger review standards, as both agencies apply the same statutory framework (Section 7 of the Clayton Act, 15 U.S.C. § 18) and, since the release of the 2023 Merger Guidelines, operate under unified analytical guidelines.
IV. Relevant Market Analysis
A critical step in any antitrust analysis of a proposed merger or acquisition is the definition of the relevant product market and relevant geographic market. Market definition serves as the framework within which the competitive effects of a transaction are assessed. The DOJ and the FTC define relevant markets using the "hypothetical monopolist" test, which asks whether a hypothetical monopolist of a group of products in a defined geographic area could profitably impose a small but significant and non-transitory increase in price (typically 5–10%) above prevailing levels. If consumers could defeat such a price increase by substituting to products or suppliers outside the proposed market, the market is drawn too narrowly. Below, we analyze the relevant product and geographic markets applicable to the proposed transaction.
A. Relevant Product Market
1. Overview of Pennfield's Business
Pennfield operates as a specialty retailer of outdoor lifestyle products, sporting goods, and adventure apparel. The company's merchandise assortment spans a broad range of product categories catering to consumers who participate in outdoor recreation and active lifestyle pursuits. Pennfield's core product categories include:
•  Outdoor and camping equipment: Tents, sleeping bags, camp stoves, coolers, lighting, and related accessories for camping, backpacking, and outdoor living;
•  Hiking and trail footwear: Hiking boots, trail running shoes, sandals, and technical footwear from leading national and international brands;
•  Performance apparel (men's and women's): Technical outerwear, base layers, insulation layers, rain gear, and activity-specific apparel designed for hiking, climbing, skiing, and other outdoor pursuits;
•  Cycling and water sports accessories: Cycling helmets, apparel, accessories, and components, as well as kayaking, paddleboarding, and water sports gear;
•  Fitness and wellness products: Yoga mats, resistance equipment, recovery tools, and other fitness-related accessories;
•  Branded adventure lifestyle apparel and accessories: Casual apparel, bags, sunglasses, watches, and lifestyle accessories marketed under outdoor and adventure brands.
Pennfield competes across both brick-and-mortar retail channels (through its 209 store locations) and e-commerce channels (through its national online platform, pennfield.com). The company's stores are typically located in suburban shopping centers, lifestyle centers, and mixed-use retail developments, positioned to attract consumers with an interest in outdoor recreation and active lifestyles.
It is important to note that Pennfield is a retailer of third-party branded and private-label merchandise. The company does not manufacture products itself. Pennfield sources merchandise from a diverse base of suppliers, including well-known national and international outdoor brands, as well as contract manufacturers that produce Pennfield's proprietary private-label products. This distinction is relevant to the vertical effects analysis discussed in Section V.C below, as Pennfield's position in the value chain is that of a downstream retailer, not an upstream manufacturer or supplier.
2. Proposed Product Market Definitions
In our analysis, we have considered three plausible product market definitions, ranging from narrow to broad. The appropriate market definition depends on the analytical framework applied by the reviewing agency, but the competitive effects analysis yields the same conclusion — no competitive concern — under any of these definitions.
Narrowest plausible market: Specialty outdoor/adventure retail. This market encompasses brick-and-mortar and online retailers whose primary merchandise assortment focuses on outdoor recreation, camping, hiking, fishing, hunting, cycling, and related adventure and outdoor lifestyle categories. Retailers in this segment differentiate themselves through specialized product knowledge, curated brand assortments, and a shopping environment tailored to outdoor enthusiasts. Competitors in this segment include dedicated outdoor specialty chains, independent outdoor retailers, and online platforms focused on outdoor products. This is the most likely market definition the agencies would employ, as it captures the closest substitutes for Pennfield's retail offering and the set of competitors most directly comparable to Pennfield in terms of product assortment, brand positioning, and target customer demographics.
Broader plausible market: Sporting goods and outdoor retail. This market includes general sporting goods retailers (i.e., large-format retailers selling a full range of sporting goods, athletic apparel, and outdoor products), mass-market retailers with significant sporting goods and outdoor departments, and e-commerce pure-play competitors selling sporting goods and outdoor products. Under this broader definition, Pennfield competes not only with specialty outdoor chains but also with large general sporting goods retailers and the outdoor departments of mass-market and warehouse club retailers.
Broadest plausible market: General retail. Under the broadest conceivable market definition, Pennfield competes with all retail formats for consumer discretionary spending on apparel, footwear, and recreational goods. This definition would include department stores, off-price retailers, and general merchandise e-commerce platforms. While this market definition is unlikely to be adopted by the agencies for purposes of analyzing this transaction (as it is over-inclusive and fails to capture the competitive dynamics specific to outdoor and sporting goods retailing), we note it for completeness.
Under any of these market definitions, the market is highly fragmented and characterized by vigorous competition. Barriers to entry are relatively low, particularly in the e-commerce channel, where new entrants can reach consumers nationally without the capital investment required to establish a physical store network. Consumer switching costs are minimal, as outdoor and sporting goods consumers regularly comparison shop across multiple retailers and channels.
We believe the FTC or DOJ would most likely analyze the transaction under the narrower specialty outdoor/adventure retail market definition, as this market most closely captures the set of products and competitors that constrain Pennfield's pricing and competitive behavior. However, even under this narrowest market definition, the market remains highly fragmented with numerous competitors, and the transaction does not result in any increase in market concentration.
3. Key Competitors in Specialty Outdoor/Sporting Goods Retail
The specialty outdoor and sporting goods retail market features a large number of competitors spanning multiple business models, including national specialty chains, general sporting goods retailers, regional and independent retailers, and online marketplaces and e-commerce platforms. The competitive landscape includes, but is not limited to, the following categories of competitors:
•  National specialty outdoor retailers with dedicated outdoor merchandise assortments, experiential retail formats, and multi-channel sales capabilities;
•  Large-format sporting goods retailers offering a broad product range across team sports, outdoor recreation, fitness, and hunting/fishing categories;
•  Mass-market retailers with significant sporting goods and outdoor departments, including big-box retailers and warehouse clubs that allocate meaningful floor space and online inventory to outdoor and sporting goods categories;
•  E-commerce platforms — both general marketplace platforms and vertically focused outdoor e-commerce retailers — that provide consumers with convenient access to a wide assortment of outdoor products, often at competitive prices;
•  Regional and independent outdoor retailers operating in specific geographic markets, many of which have strong local brand recognition and loyal customer bases;
•  Direct-to-consumer brands that sell outdoor apparel, footwear, and equipment directly to consumers through their own online storefronts, bypassing traditional retail intermediaries.
No single competitor holds a dominant market share in the specialty outdoor/sporting goods retail market. Industry data and estimates suggest that the top five specialty outdoor and sporting goods retailers collectively account for less than 35% of total market revenue, reflecting the fragmented nature of the competitive landscape. The market is characterized by low concentration, numerous competitive alternatives for consumers, and ongoing competitive entry and expansion by both brick-and-mortar and online retailers. This competitive structure is consistent with a market in which no single acquisition — particularly one involving a financial buyer — would be expected to raise competitive concerns.
B. Relevant Geographic Market
1. National Market
Pennfield operates across 34 states through its network of 209 physical retail locations and sells to consumers nationwide through its e-commerce platform. The company's competitors similarly operate on a national basis, with both physical store networks and online sales channels that serve customers throughout the United States. Major national competitors maintain store networks spanning dozens of states and ship products to all 50 states via their e-commerce operations.
Given the national scope of competition in specialty outdoor and sporting goods retail — and the particular significance of e-commerce as a competitive channel that transcends local geographic boundaries — the relevant geographic market is properly defined as nationwide (the United States). A nationwide market definition is consistent with the approach the agencies have taken in prior retail mergers involving competitors with national store footprints and e-commerce operations.
We note that Pennfield has no foreign operations. The company does not operate retail locations outside the United States, and its international online sales are not material to its business. Accordingly, no non-U.S. geographic markets are relevant to this analysis, and no non-U.S. merger control filings have been identified as required (as discussed further in Section VII below).
2. Local/Regional Market Considerations
Although the primary relevant geographic market for this analysis is national, we have also considered whether the transaction could raise competitive concerns in local or regional geographic markets. In retail merger analysis, the agencies sometimes examine competition at the local level, particularly when the merging parties operate competing stores in overlapping trade areas (e.g., within the same metropolitan statistical area ("MSA") or within a specified drive-time radius).
In this case, however, a local market analysis does not alter our conclusions. Pennfield's 209 store locations are distributed across 34 states, resulting in a diffuse geographic footprint with no significant concentration of stores in any single metropolitan area or region. In each local market where Pennfield operates a store, consumers have access to multiple competing retailers, including national chains, regional independents, and online alternatives. Moreover, because HPE Fund IV is a financial buyer and does not own any competing retail operations, the transaction does not eliminate a competitor in any local market. There are no overlapping stores to analyze, and the competitive dynamics in each local market where Pennfield is present will be unchanged by the transaction.
Accordingly, neither a national nor a local geographic market analysis gives rise to any competitive concern.
V. Competitive Effects Analysis
Having defined the relevant product and geographic markets, we now turn to an assessment of the competitive effects of the proposed transaction. The analysis considers horizontal effects (including market concentration and overlap), vertical effects, potential competition and conglomerate effects, coordinated effects, and buyer-side market power. In each case, we conclude that the transaction does not give rise to competitive concerns that would support an enforcement action.
A. Market Concentration
The specialty outdoor and sporting goods retail market is characterized by low concentration, whether measured at the national or local level. The market supports a large number of competitors across multiple formats and channels, and no single firm holds a dominant competitive position.
Pennfield's estimated national market share in the specialty outdoor retail market is approximately 3–5%, based on FY 2024 revenue of $1.62 billion in a market estimated at approximately $35–50 billion in total size, depending on the precise market definition employed. Under the broader sporting goods and outdoor retail market definition, Pennfield's market share is correspondingly lower. Under any reasonable market definition, Pennfield is a modest participant in a large and competitive market.
A critical consideration in this analysis is the nature of the acquiring party. HPE Fund IV is a financial buyer — a private equity fund — rather than an operating competitor in the specialty outdoor or sporting goods retail market. When a financial buyer acquires a company, the transaction does not, by itself, increase market concentration, because no competitor is eliminated from the market. The surviving entity (Pennfield) will continue to operate as a standalone retailer, competing against the same set of competitors as before the transaction, albeit under new ownership. The HHI (Herfindahl-Hirschman Index), which is the standard measure of market concentration used by the DOJ and FTC, would not change as a result of this transaction in the specialty outdoor/sporting goods retail market, because no horizontal competitor is being absorbed.
The agencies could, however, examine whether the acquiring financial buyer's existing portfolio companies create a de facto horizontal overlap with the target. We address that question in the following section.
B. Horizontal Overlap Analysis — Harrowgate Portfolio Review
The principal competitive concern in a private equity acquisition arises when the financial sponsor's existing portfolio includes one or more companies that compete with the target in the same relevant product and geographic markets. In such cases, the agencies may analyze the combined competitive effect of the portfolio company and the target under common ownership, applying the same framework used for horizontal mergers between operating companies.
To assess this risk, we conducted a comprehensive review of the entire investment portfolio of Harrowgate Capital Partners LLC, encompassing all four flagship private equity funds (Funds I through IV) and all associated co-investment vehicles. This review was conducted in coordination with the Harrowgate deal team and was based on portfolio information provided by Rebecca Talmadge and Jonah Whitfield.
Harrowgate Capital Partners LLC manages approximately $14.2 billion in total assets under management. The firm's investment strategy focuses on mid-market consumer and specialty retail businesses. As of the date of this memorandum, Harrowgate's portfolio across all funds includes companies operating in the following retail verticals:
•  Home furnishings and décor retail;
•  Personal care and beauty retail;
•  Specialty food and beverage retail;
•  Pet products retail and distribution;
•  Children's apparel and accessories retail.
None of these portfolio companies operates in the specialty outdoor, sporting goods, or adventure retail segment or in any directly adjacent product market that would create a cognizable horizontal overlap with Pennfield's business lines. Each of Harrowgate's existing consumer and retail portfolio companies competes in distinct retail verticals with different product assortments, different customer demographics, different supplier bases, and different competitive dynamics than the specialty outdoor and sporting goods market in which Pennfield operates.
Furthermore, we found no material product or customer overlap between any Harrowgate portfolio company and Pennfield. Pennfield's merchandise — outdoor equipment, performance apparel, hiking footwear, cycling and water sports accessories, and adventure lifestyle products — does not overlap with the product categories sold by Harrowgate's home furnishings, personal care, specialty food, pet products, or children's apparel portfolio companies. Consumers do not substitute between these categories, and the suppliers and brands from which these businesses source their merchandise are different.
HPE Fund IV's current portfolio (Fund IV, vintage 2023) was separately reviewed and confirmed to contain no companies with any competitive nexus to Pennfield. HPE Fund IV's investments to date have been in sectors unrelated to outdoor and sporting goods retail.
Conclusion: There are no "2(a)" (portfolio company) competition concerns. The transaction does not create a horizontal overlap between Pennfield and any existing Harrowgate portfolio company under any plausible market definition, and the agencies have no basis on which to pursue a horizontal theory of competitive harm.
C. Vertical Effects
Vertical theories of competitive harm arise when a merger combines firms at different levels of the supply chain (e.g., a merger between a supplier and a retailer, or between a manufacturer and a distributor) and the combined firm has the ability and incentive to foreclose competitors from access to an essential input or an important distribution channel.
In the present transaction, vertical concerns are not present for the following reasons:
•  Pennfield is a downstream retailer, not an upstream manufacturer or supplier. Pennfield purchases merchandise from third-party brands and contract manufacturers and resells that merchandise through its stores and e-commerce platform. Pennfield does not manufacture products, does not own or operate production facilities, and does not control any critical input in the outdoor/sporting goods supply chain.
•  Harrowgate does not own or control any suppliers, distributors, manufacturers, or other businesses operating at upstream or midstream levels of the outdoor or sporting goods supply chain. No Harrowgate portfolio company supplies products to Pennfield or to Pennfield's competitors.
•  No input foreclosure concern arises, because the combined entity would not control an input that competitors need. The transaction does not give Pennfield (or its new financial sponsor) the ability to deny competitors access to any essential product, brand, or supply source.
•  No customer foreclosure concern arises, because Pennfield, even post-acquisition, will represent only a small fraction of total retail distribution for any outdoor or sporting goods brand. Pennfield's estimated market share of 3–5% means that suppliers will continue to have access to numerous alternative retail channels.
Accordingly, the transaction raises no vertical integration concerns, and no foreclosure theories — whether characterized as input foreclosure or customer foreclosure — are applicable.
D. Potential Competition / Conglomerate Effects
The agencies may also consider whether a merger eliminates potential competition — that is, whether the acquiring firm was a likely future entrant into the target's market, such that the acquisition eliminates the competitive pressure that the acquiring firm's potential entry would have exerted.
This theory is inapplicable here. Harrowgate is a financial buyer with no plans, capabilities, or realistic prospects of entering the specialty outdoor retail market de novo absent this acquisition. Harrowgate is an investment management firm, not a retailer. It does not operate retail businesses directly and enters retail markets only through portfolio investments. The notion that Harrowgate would independently develop a specialty outdoor retail platform in competition with Pennfield is not supported by any evidence and does not meet the demanding standard for a potential competition claim, which requires a showing that (i) the acquiring firm had the ability and incentive to enter the market independently, (ii) independent entry was likely in the near future, and (iii) independent entry would have had a pro-competitive effect.
Additionally, no conglomerate effects or portfolio power concerns are present. The acquisition does not enable tying, bundling, or cross-subsidization strategies that would harm competition. Pennfield's products (outdoor and sporting goods) are not complements to any products sold by Harrowgate's existing portfolio companies, and there is no basis for a theory that common ownership of unrelated retail businesses would confer competitive advantages that harm rivals.
E. Coordinated Effects
The agencies also assess whether a merger increases the likelihood of coordinated behavior among remaining competitors — that is, whether the post-merger market structure would facilitate tacit or explicit coordination on prices, output, or other competitive dimensions.
The specialty outdoor/sporting goods retail market exhibits characteristics that make coordinated behavior implausible:
•  The market is highly fragmented, with numerous competitors of varying sizes, business models, and cost structures;
•  Product offerings are differentiated across retailers, with each competitor carrying a distinct assortment of brands, private-label products, and merchandise categories;
•  Pricing is highly transparent to consumers (particularly through online channels), making it difficult for competitors to sustain supra-competitive prices without losing sales to rivals;
•  Barriers to entry are relatively low, particularly in the e-commerce channel, meaning that any attempt at coordinated price increases would attract competitive entry;
•  The market includes a diverse mix of competitor types — specialty chains, general sporting goods retailers, mass merchants, e-commerce platforms, and independent retailers — making coordination across such a heterogeneous group of firms implausible.
The proposed transaction does not change the market structure in a manner that would facilitate coordination among remaining competitors. The number of competitors in the market is unchanged by the transaction (because the acquiring party is a financial buyer, not a competitor), and the competitive dynamics of the market will remain unaltered post-closing.
F. Buyer Power / Monopsony
Finally, we have considered whether the transaction raises concerns about buyer-side market power (monopsony), which would occur if the combined entity had the ability to depress prices paid to upstream suppliers below competitive levels.
Pennfield purchases merchandise from a large and diverse base of suppliers. No single supplier accounts for a dominant share of Pennfield's cost of goods sold, and Pennfield's purchases represent a small fraction of total industry demand for any individual brand or product category. Post-acquisition, Pennfield will continue to be one of many retail customers for its suppliers, and the change in ownership from public shareholders to a private equity sponsor does not alter Pennfield's purchasing practices, supplier relationships, or bargaining position in any material way.
Accordingly, the transaction does not create buyer-side market power that would harm upstream competition or raise monopsony concerns.
VI. Assessment of Enforcement Risk
A. DOJ/FTC Challenge Likelihood
Based on the comprehensive analysis set forth in the preceding sections, we assess the risk of a substantive antitrust challenge to the proposed transaction as low. Specifically:
•  Estimated probability of a second request: Less than 5%.
•  Estimated probability of an enforcement action (including a complaint, consent decree, or requirement for divestitures or other structural remedies): Negligible.
The principal factors supporting this assessment are as follows. First, the transaction involves a financial buyer acquiring a target in a highly fragmented market. Private equity acquisitions in fragmented retail markets have historically received favorable treatment from the agencies during HSR review, provided that the sponsor's existing portfolio does not create horizontal overlaps with the target's business. Second, Harrowgate's portfolio contains no companies with meaningful competitive overlap with Pennfield, eliminating the most common basis for antitrust scrutiny of private equity transactions. Third, the market is characterized by low concentration, numerous competitors across multiple channels, low barriers to entry, and low consumer switching costs — all factors that weigh heavily against an enforcement action. Fourth, no vertical, conglomerate, or coordinated effects concerns are present.
Historical precedent reinforces this assessment. Private equity acquisitions of specialty retailers in fragmented markets have generally cleared HSR review without a second request, absent portfolio overlap, unusual market circumstances, or serial acquisition patterns. We are not aware of any recent enforcement action by the DOJ or FTC involving a financial buyer's acquisition of a specialty outdoor or sporting goods retailer in the absence of horizontal overlap.
B. Second Request Risk
A second request — formally known as a request for additional information and documentary material pursuant to 15 U.S.C. § 18a(e) — is the primary enforcement tool available to the agencies during the HSR waiting period. Issuance of a second request extends the waiting period until the parties have substantially complied with the request and an additional period (typically 30 days for mergers) has elapsed. Second requests are resource-intensive, often requiring the production of millions of documents and the preparation of detailed data submissions. Compliance with a second request typically requires four to six months, depending on the scope of the request and the volume of responsive materials.
Given the absence of competitive overlaps and the highly fragmented nature of the relevant market, we assess the likelihood of a second request as very low — less than 5%. In our experience, the agencies are most likely to issue second requests in transactions that present material horizontal overlaps, significant market concentration, or novel competitive theories that warrant further investigation. None of those circumstances is present here.
In the unlikely event that a second request is issued, the parties would have adequate time to respond within the transaction's contractual timeline. The Merger Agreement's Outside Date of September 30, 2025 — approximately six months from the expected signing date of April 7, 2025 — provides a sufficient time horizon to accommodate second request compliance, even under conservative assumptions regarding the pace of document production and review. However, a second request would likely delay closing beyond the currently estimated closing date of approximately June 30, 2025, and would impose significant additional costs in the form of document review, data compilation, and related legal fees.
The Merger Agreement provides that the closing of the transaction is conditioned on the expiration or early termination of the HSR Act waiting period. The 15-business-day marketing period that runs following execution of the Merger Agreement (during which the debt financing syndication will be conducted) operates independently of the HSR timeline and does not extend or interact with the HSR waiting period.
C. State Attorney General Risk
In addition to federal antitrust review under the HSR Act, state attorneys general have independent authority to review mergers and acquisitions for competitive effects within their respective states, typically under state antitrust statutes or the parens patriae provisions of the Clayton Act (15 U.S.C. § 15c). Several state attorneys general have been active in recent years in challenging mergers, particularly in the healthcare, technology, and agricultural sectors.
We assess the risk of a state-level antitrust challenge to the proposed transaction as negligible. The absence of competitive concerns at the national level makes it unlikely that any state attorney general would identify state-specific competitive harms sufficient to justify an enforcement action. Moreover, Pennfield's geographic footprint is diffuse, spanning 34 states, with no significant concentration of stores in any single state. Each state in which Pennfield operates features multiple competing retailers of outdoor and sporting goods, and the acquisition does not alter the competitive conditions in any state or local market. We are not aware of any pending state-level investigation or inquiry related to either Pennfield or Harrowgate that would suggest heightened state-level scrutiny of this transaction.
VII. Non-U.S. Merger Control Filings
We have conducted a jurisdictional analysis to determine whether the proposed transaction triggers mandatory merger control notification requirements in any jurisdiction outside the United States. The analysis examined the filing thresholds and jurisdictional requirements of all major non-U.S. merger control regimes, including, without limitation, the European Union (under the EU Merger Regulation), the United Kingdom (under the Enterprise Act 2002), Canada (under the Competition Act), Australia (under the Competition and Consumer Act 2010), the People's Republic of China (under the Anti-Monopoly Law), Japan (under the Act on Prohibition of Private Monopolization), Germany (under the Act against Restraints of Competition), and other significant jurisdictions.
Based on this analysis, no non-U.S. merger control filings have been identified as required. The principal reason is that Pennfield has no foreign operations, no international retail locations, and no material international revenue. Pennfield's business is conducted entirely within the United States, and its e-commerce platform does not generate meaningful international sales. Accordingly, the transaction does not meet the local nexus, turnover, or market share thresholds that trigger mandatory notification requirements in any non-U.S. jurisdiction.
This conclusion has been confirmed through a comprehensive review of Pennfield's revenue and asset data against the applicable jurisdictional thresholds in each relevant jurisdiction. We will continue to monitor this analysis in the event that any new information regarding Pennfield's international revenue or operations comes to light prior to the filing date, but we do not anticipate any change to this conclusion.
VIII. Recommendations
Based on the analysis set forth in this memorandum, we make the following recommendations to the deal team and the client.
A. Filing Strategy
We recommend that the parties proceed with HSR Act premerger notification filings on or about April 8, 2025, the day following the expected execution of the Merger Agreement on April 7, 2025. Prompt filing will ensure that the 30-day initial waiting period begins as early as possible, minimizing potential delays to the anticipated closing timeline.
The $280,000 filing fee should be paid by wire transfer to the FTC's designated account concurrently with the filing submission. Our office will coordinate the wire transfer instructions with the Harrowgate deal team and provide the necessary FTC banking details.
We further recommend that the parties request early termination of the waiting period in their respective HSR filings. Although the likelihood of the FTC granting early termination remains uncertain given the agency's suspension of the practice since February 2021, there is no downside to making the request, and if early termination is granted, it could accelerate the timeline to closing by up to several weeks.
In preparing the filings, we will need to compile and produce all documents responsive to Items 4(c) and 4(d) of the HSR Notification and Report Form. Item 4(c) requires the production of documents prepared by or for any officer or director of the filing person (or, in the case of an unincorporated entity, comparable officials) that analyze the transaction with respect to competition, competitors, market shares, potential for sales growth, or expansion into new product or geographic markets. Item 4(d) requires production of certain confidential information memoranda, studies, surveys, analyses, and reports prepared by investment bankers, consultants, or other third-party advisors that analyze the transaction with respect to market shares, competition, competitors, or potential for growth or expansion. The scope of responsive documents will include materials from the Project Summit data room, internal Harrowgate investment committee memoranda and presentations, and any financial advisor materials prepared by Ridgepoint Partners LLC in connection with the transaction. Review of these materials should be coordinated promptly between Ryan Kowalski, Megan Chu, and our antitrust team to ensure timely completion of the filing.
B. Document Preparation
We recommend the following steps for preparing the HSR filing forms and associated document productions:
(1) Acquiring person filing (HPE Fund IV / Harrowgate): Our team will prepare the HSR Notification and Report Form for the acquiring person, in coordination with the Harrowgate deal team and Ridgepoint Partners LLC (Marcus Hale, Priya Chandrasekaran). We will need to collect and review all potentially responsive 4(c) and 4(d) documents from Harrowgate's investment committee files, deal team files, and Ridgepoint's financial advisor files. A document hold notice should be issued to all relevant individuals at Harrowgate and Ridgepoint promptly upon execution of the Merger Agreement.
(2) Acquired person filing (Pennfield): Pennfield, as the acquired person, is also required to submit an HSR Notification and Report Form. Pennfield's filing will be prepared in coordination with Pennfield's outside counsel, Calloway, Briggs & Harmon LLP (Janet Alcorn). We will liaise with Ms. Alcorn to ensure that both filings are submitted simultaneously and are consistent in their description of the transaction and the parties.
(3) Narrative submission: We will draft a narrative description of the transaction and competitive analysis for inclusion in the HSR filing. The narrative will describe the transaction structure, the relevant markets, the competitive landscape, and the basis for our conclusion that the transaction does not raise competitive concerns. A well-crafted narrative can facilitate the agencies' review and reduce the likelihood of follow-up inquiries.
C. Coordination with Merger Agreement
The Merger Agreement includes the expiration or early termination of the HSR Act waiting period as a mutual condition to closing. This is a standard provision in transactions subject to HSR review and ensures that neither party is obligated to close the transaction until antitrust clearance has been obtained.
The Merger Agreement's marketing period of 15 business days runs from the execution date of the Merger Agreement and is designed to provide time for the syndication of the committed debt financing. This marketing period operates independently from the HSR timeline. The marketing period is expected to conclude prior to the expiration of the HSR waiting period, and accordingly, the HSR waiting period is expected to be the binding timeline constraint for closing.
The Outside Date under the Merger Agreement is September 30, 2025, providing approximately six months from the expected signing date. This timeline provides ample cushion even in the unlikely event of a second request. If the initial waiting period expires without a second request on or about May 8, 2025, and all other conditions to closing are satisfied, the transaction could close as early as late May or early June 2025, subject to the satisfaction of remaining conditions and the logistics of closing.
We note that the Merger Agreement does not include a "hell-or-high-water" provision — that is, a provision requiring the buyer to take any and all actions necessary to obtain antitrust clearance, including agreeing to divestitures or other structural remedies. The absence of such a provision is appropriate given our low risk assessment. In the context of the current negotiation, we do not expect the inclusion of a hell-or-high-water provision to become a point of contention, as the parties and their respective advisors appear aligned in their assessment that the transaction presents no material antitrust risk.
D. Monitoring
Although the antitrust risk associated with this transaction is low, we recommend ongoing monitoring of certain developments that could affect the regulatory landscape:
•  FTC/DOJ enforcement priorities. The current enforcement environment has seen heightened scrutiny of private equity acquisitions, particularly in sectors where financial sponsors have engaged in serial acquisition strategies (so-called "roll-up" strategies). Recent enforcement actions and public statements by FTC and DOJ leadership have signaled increased attention to the competitive effects of private equity ownership, including concerns about the accumulation of market share through successive add-on acquisitions within a single platform. However, the proposed Pennfield transaction is distinguishable from these roll-up concerns: it involves a single, standalone acquisition of a specialty retailer with no existing portfolio overlap, and Harrowgate is not pursuing a consolidation strategy in the outdoor/sporting goods sector. We do not believe the current enforcement posture toward private equity roll-ups should alter our risk assessment, but we will continue to monitor developments.
•  Policy changes. We will monitor for any changes in the HSR Act, HSR Rules, or the agencies' merger review practices that could affect the filing process or timeline. The FTC's recent amendments to the HSR Notification and Report Form, which took effect in 2025, have expanded the scope of information required in filings; our team is fully familiar with the revised form requirements and will prepare the filings in compliance with the current rules.
•  Industry-specific developments. We will monitor for any industry-specific developments — such as a competing transaction in the outdoor/sporting goods retail sector, or an agency investigation involving market participants — that could affect the agencies' interest in reviewing this transaction.
IX. Conclusion
The proposed acquisition of Pennfield Holdings, Inc. by Harrowgate Private Equity Fund IV LP presents low substantive antitrust risk. The specialty outdoor and sporting goods retail market in which Pennfield operates is highly fragmented, characterized by numerous national, regional, and online competitors, low concentration, and vigorous competition. Pennfield holds a modest estimated market share of approximately 3–5% under the narrowest plausible market definition. Harrowgate's existing investment portfolio, spanning all four flagship funds and associated co-investment vehicles, contains no companies with horizontal overlap in Pennfield's product markets. No vertical, conglomerate, or coordinated effects concerns have been identified.
The HSR Act filing should proceed on the anticipated timeline, with submission of both the acquiring person and acquired person notification forms on or about April 8, 2025. The initial 30-day waiting period is expected to expire on or about May 8, 2025, assuming no early termination is granted and no second request is issued. The probability of a second request is estimated at less than 5%, and the probability of a substantive enforcement action is negligible.
We recommend proceeding with the transaction without antitrust-related structural remedies, divestitures, or hold-separate commitments. No modifications to the transaction structure are necessary from an antitrust perspective, and we do not anticipate that the HSR filing process will present an impediment to closing the transaction on the anticipated timeline.
We are available to discuss this assessment in further detail with the deal team and the client at their earliest convenience, and we will work closely with Ryan Kowalski and Megan Chu in the coming days to begin preparation of the HSR filing forms and the associated 4(c)/4(d) document collection.
X. Contact Information
Questions regarding this memorandum or the HSR filing process should be directed to:
Elaine Forsythe Specialist Partner, Antitrust & Competition Calderwood & Harkness LLP One Liberty Plaza, 55th Floor New York, NY 10006 Telephone: (212) 555-4820
Email: eforsythe@calderwoodharkness.com
Elaine Forsythe is available to discuss this assessment with the deal team and the client at their convenience. She will coordinate directly with Ryan Kowalski and Megan Chu on HSR filing preparation, 4(c)/4(d) document collection and review, and any related antitrust matters arising in connection with the transaction.
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