Editor’s note: Since the below was published, the Vista Outdoor board negotiated a higher price from CSG, and pressure mounted from both TIG Advisors and Gates Capital to turn down the offer from CSG and instead engage with a competing offer from MNC Capital to buy the company outright. After completing more negotiations, the board rejected MNC’s offer and again urged shareholders to vote for the CSG deal on Sept. 25. 

The story below was updated July 3.

If you’re anything like me, it’s challenging to keep up with the ongoing Vista Outdoor sale/spinoff saga that seems to have twists and turns every week  – and sometimes every day.

It’s a story that has dragged on for two years, and has not reached the final chapter yet.  Last week, there were several important developments including:

• Increased offers from two bidders to buy some or all of the company.
• Clearance from a key governmental national security panel to sell the company’s ammo business to a foreign arms manufacturer.
• Tit for tat public statements between Vista and one of the companies that wants to acquire it about whether the potential buyer has adequate financing.
• Another delay in a shareholder vote about the sale of the company’s ammo business,

Vista Outdoor is a very important player in the outdoor and action sports industries due to its ownership of brands such as Giro, CamelBak, Fox, Bell, Camp Chef, QuietKat, Bushnell and more, and the tug of war over the company’s future has implications for the industry as a whole.

But a lot of the company’s current issues stem from its $1.5 billion ammo business, which comes with many complexities. Vista’s stock in general has been undervalued in public markets because some large institutional investors won’t buy stock in ammo and other firearms companies due to ESG (Environmental, Social, and Governance) considerations.  That limits the investor pool and thus the valuation, said Anna Glaessgen, a senior analyst at B. Riley Financial who covers Vista Outdoor.

In addition, arms and ammunition companies tend to have extreme swings in demand and sales, which leads to a lot of volatility in performance, which is not attractive to public markets. But because ammo businesses have high cash flows and high margins, they are appealing in a private company setting.

“That’s why you see these bidders coming out of the ether late in this process,” Glaessgen of B. Riley said. “And that’s why this process has been so bizarre versus anything I’ve experienced in my career, where you have all these competing offers and the changes occurring.”

Another complicating factor for Vista: the downturn in the outdoor industry and the company’s outdoor brands since the separation plan was announced two years ago.

Overall, the potential sale and spinoff of some or all of the company has turned into a fascinating business, political, and national security tale that could become a hot topic in the upcoming presidential election.

Here is a primer on the background of the deal, key developments along the way, and the implications of the possible outcomes.

CamelBak is a key brand in Vista’s outdoor division. Photo courtesy of Vista Outdoor.

The Original Vista Outdoor Separation Plan

Vista Outdoor has two big sectors: Outdoor Products and Sporting Products.

While Vista uses the term Sporting Products, it’s really the ammunition division, which includes the Federal, Remington, CCI, Speer, Estate Cartridge, and HEVI-Shot brands.

The original Vista separation plan, announced in May 2022, called for the company to separate the divisions into two independent, publicly traded companies with a targeted completion date at the end of 2023.

Needless to say, that separation timeline has not unfolded as planned.

Wrinkle No. 1 – Foreign Arms Conglomerate Enters the Picture

After Vista announced its separation plan, Czechoslovak Group (CSG) made an offer to buy Vista’s ammo division, which Vista accepted in October of 2023.

The agreed-upon purchase price was $1.91 billion.

While selling the ammo business was not part of the original plan, Vista said it still met the general outline of the go-forward strategy – to split the two divisions apart. And, in this scenario, the outdoor business could still become a standalone, publicly traded company.

Wrinkle No. 2 – National Politicians Get Involved

Because CSG is owned by a foreign company, the sale of Vista’s ammo business has drawn scrutiny from law enforcement groups, which buy ammunition from Vista-owned brands, and from politicians such as U.S. Senator J.D. Vance, who is one of the top vice presidential candidates for presumptive Republican presidential nominee Donald Trump.

Vance and some other Republican senators are opposed to the sale because of national security concerns.

“We cannot afford for America’s supply of weapons to fall into the wrong hands,” Vance said in January, urging a review of the sale.

However, in a major development last week, the Committee on Foreign Investment in the United States (CFIUS), a government agency that reviews these types of acquisitions because of national security issues, cleared CSG’s acquisition of Vista’s ammo business.

A Federal Ammunition plant in Anoka, Minnesota. Photo courtesy of Vista Outdoor.

Wrinkle No. 3 – Enter a New Bidder Proposing to Buy the Whole Company and Take it Private

As the CSG deal for the ammo business was moving forward through numerous regulatory hurdles, a new bidder emerged in March of this year: MNC Capital, an investment group led by former Vista Outdoor board member Mark Gottfredson, who resigned from the Vista board in January.

MNC wants to buy the entire company – both the outdoor and ammo divisions, and take the company private.

Vista initially rejected the all-cash, $35 per share offer, then three weeks later, MNC made another offer for $37.50 per share.

Vista began talks with MNC, but eventually rejected the $37.50 offer on May 28, saying it undervalued the outdoor division. MNC raised its offer to $39.50, which again, Vista rejected.

MNC’s interest forced CSG to also raise its offer for the Vista ammo business twice, with the latest increase announced last week.

CSG is now offering to buy the ammo business for approximately $2 billion, an increase of $90 million.

With an increased offer from CSG and national security clearance from the U.S. government, Vista Outdoor’s board of directors reiterated Wednesday that it backed the CSG bid and urged shareholders to vote for the sale at a scheduled July 2 vote.

Wrinkle No. 4 – MNC Raises the Price Again – and the Stakes

After CSG raised its offer and the national security clearance came through last week, MNC also raised its bid for the whole company to $42 per share, or approximately $3.2 billion.

MNC pointed out that because it is a U.S.-based entity, there are no regulatory issues that come with its bid for the company.

Wrinkle No. 5 – Institutional Advisory Group Flip Flops

The Institutional Shareholder Services (ISS), an independent proxy advisory firm that advises large shareholders such as investment banks and asset management firms, originally recommended earlier this month that shareholders vote in favor of the ammo sale to CSG.

According to Reuters, however, ISS changed its mind later this month, and recommended shareholders abstain from voting, arguing they should hold out for a better deal for the entire company.

Vista acquired Fox Racing in 2022 for $540 million. Photo courtesy of Fox Racing.

Wrinkle No. 6 – Vista Already on the Standalone, Public Company Track with Revelyst

With two compelling offers in hand, the Vista Board of Directors will have to decide which is the best deal for shareholders, and that could come down to the true valuation of different pieces of the business and of the business as whole.

However, the company is already pretty far down the outdoor standalone track. The outdoor business, which would become its own publicly traded company has its own name – Revelyst – while the ammo business is now called the Kinetic Group.

Revelyst has named an executive team in anticipation of becoming its own standalone company including CEO Eric Nyman, CFO Andrew Keegan, and Chief Human Resources Officer Joyce Butler, in addition to other C-suite executives.

“I think it’s very difficult,” Glaessgen of B. Riley said. “Clearly the team as you referenced has been brought on to lead a public company so there’s an inherent bias toward wanting to keep the company public.”

The Kinetic Group also has its own leadership team, including CEO Jason Vanderbrink. Vanderbrink and Nyman are serving as co-CEOs of Vista during this separation process.

Revelyst has also launched a restructuring plan called Gear Up to increase efficiency and profitability in the outdoor division in anticipation of becoming a standalone company. That entailed closing offices and consolidating brand platforms to reduce duplicate roles and streamline operations.

Wrinkle No. 7 – Outdoor Division and Industry Struggles

Another complication: When Vista announced the separation plan, the outdoor business was riding a COVID high. The outdoor industry in general, and Vista-owned outdoor brands as well, have seen a reversal in results since then.

“The ammo business may be complicated, but it’s a cash cow,” said Nate Pund, managing director and global head of the Active Lifestyle banking team at Houlihan Lokey. “If the sale of that division goes through, investors will be surprised at the state of the outdoor business. Vista made a lot of acquisitions at the height of the market, and those brands are not performing nearly as well now.”

Vista acquired Simms Fishing in 2022 for $192 million. Photo courtesy of Vista Outdoor.

Wrinkle No. 8 – Shareholder Vote Delayed Again, Potential Break Fee

The shareholder vote on the ammo sale to CSG, which has been postponed once before, was supposed to take place July 2.

But with the latest increased offer from MNC to consider, the board announced Thursday that it will postpone the shareholder vote again to July 23 while it assesses the competing bids.

The board also said the MNC needs to provide more details about how it will finance the acquisition by today.

“Despite MNC’s public statements that it has secured financing and Vista Outdoor’s prior requests for evidence of such financing, MNC has never delivered to Vista Outdoor evidence of committed financing that is ready to be executed,” the board said in a statement Thursday. (Update: Vista confirmed July 3 that MNC had submitted additional information about the financing behind its offer, and said it will continue to evaluate MNC’s bid.)

Another consideration for the board: If Vista opts to not go with CSG and terminates that sale agreement, the company will have to pay CSG a $48 million break fee.

If the sale to CSG goes through, Revelyst will officially become its own publicly traded company a week or so later.

But that will have its own major challenges Pund said.

“Being a public company sucks these days,” Pund said. “I wouldn’t wish it on my worst enemy.”