Vista Outdoor Inc.’s board early Tuesday rejected MNC Capital’s upgraded offer to acquire the company, believing the proposal “significantly” undervalues the Revelyst outdoor business and that its planned sale of the Kinetic ammunition business to Czechoslovak Group (CSG) “will drive significantly greater value” for shareholders.
Vista also confirmed that CSG raised its offer to acquire Kinetic, which includes the Federal, Remington, CCI, Hevi-Shot, and Speer ammunition brands, by $50 million to $1.96 billion. Last October, Vista entered into a $1.91 billion deal to sell Kinetic to privately held Czech defense and civil manufacturing firm CSG. Following the sale, Revelyst, its outdoor products segment, would continue as a standalone public company.
Revelyst operates three segments: Adventure Sports (Fox Racing, Bell Helmets, Giro Sport Design, CamelBak, QuietKat Electric Bikes, and Blackburn); Outdoor Performance (Simms Fishing Products, Bushnell, Blackhawk, Stone Glacier, Camp Chef, and Primos) and Precision Sports and Technology (Foresight Sports, Bushnell Golf and Pinseeker).
Texas-based MNC on February 19 initially made an unsolicited offer of $35 a share to acquire Vista Outdoor in a deal valued at $2.9 billion, including debt. On March 4, Vista rejected the offer, believing it did not take into account the significant shareholder value that was expected to be created through the separation of its outdoor products and sporting goods segments.
On March 25, MNC increased its offer to $37.50 per share, or approximately $3 billion. On April 22, Vista Outdoor confirmed it had engaged in discussions with MNC on the revised offer while indicating it had advised MNC “to deliver an improved economic proposal” following Vista providing extensive non-public information under a non-disclosure agreement to MNC. A special meeting of shareholders was adjourned to June 14 from May 16 given the talks with MNC, although Vista’s board continued to recommend its stockholders vote in favor of the deal with CSG.
On Tuesday, Vista outright rejected MNC’s $37.50-per-share offer because the firm had not improved its latest offer and it had not received committed financing from the investment firm.
In a letter sent to MNC included in a press release, Michael Callahan, chairman of Vista’s board, said the board, in consultation financial and legal advisors, had determined that MNC’s bid “significantly undervalues Vista and does not take into account the significant stockholder value that is expected to be created by the separation of Revelyst and The Kinetic Group into two independent companies.”
The letter continued, “This is further reinforced by the fact that Vista Outdoor decreased its total debt by $115 million in Q4 of FY24, that the Revelyst business is expected to double standalone adjusted EBITDA in FY25 and achieve mid-teens EBITDA margin in the long term and that Vista Outdoor is well on its way to delivering on the GEAR Up initiative and is expecting to deliver $25 million-$30 million in savings in FY25.”
Callahan concluded, “In light of the lack of compelling value in the MNC Revised Indication and the fact that MNC has not delivered an improved economic proposal, we continue to believe that our pending transaction with CSG will drive significantly greater value for our stockholders.”
Vista had also turned down a $30-a-share cash-and-stock merger offer from Czech gunmaker Colt CZ Group last November on similar grounds.
More Money for Shareholders
With the increased purchase price, the cash consideration to Vista Outdoor stockholders payable as part of the spinoff rises 24%, or $3.10 per share of Vista Outdoor common stock, from $12.90 to $16. Under the updated merger agreement with CSG, Vista Outdoor stockholders will now receive at the closing of the transaction: one share of common stock of Revelyst and $16 in cash per share of Vista Outdoor common stock.
Additionally, Vista said it will return to its stockholders about $130 million of excess cash generated in its fourth quarter as well as the $50 million increase it receives from CSG after the revised offer.
Shares of Vista were trading at $34.63, down $0.27, Tuesday in early afternoon trading.
The transaction is expected to close in 2024 subject to approval of Vista Outdoor’s stockholders and receipt of clearance by the Committee on Foreign Investment in the United States.
James Chartier, an analyst at Monness, Crespi, Hardt & Co. who covers Vista Outdoor, said, in a note, according to Reuters, “Some investors may be either be reluctant or prohibited from owning an ammunition business for various reasons … so by splitting the company up, Vista Outdoor believes that Revelyst will garner a higher valuation multiple and the value of both companies can be better maximized”
MNC hasn’t yet responded to Vista Outdoor’s latest moves.
