As Vista Outdoor gears up to separate its Outdoor Products and Sporting Products segments into two independent, publicly traded companies, the company has detailed the decision behind the move in a recent regulatory filing.
Vista hopes the spinoff will help its 41 brands get more dedicated resources, grow investment, and develop new products.
“As the separation nears, our confidence in the future of both businesses continues to strengthen,” said Gary McArthur, interim CEO of Vista Outdoor. “Sporting Products — soon to be called The Kinetic Group — and Outdoor Products are well-positioned for continued growth and success as standalone, publicly traded companies.”
Post-spinoff, Vista Outdoor will be rebranded as The Kinetic Group, with the name, logo and NYSE ticker “HUNT”. Vista Outdoor is expected to announce the name and branding of the new Outdoor Products company soon. The spinoff is expected to be completed in the fourth quarter of this calendar year.
The Daily combed through Vista’s Form 10 registration statement with the Securities and Exchange Commission to gain insights into the spinoff decision, the company’s growth strategy, and how it evaluates market opportunities.
Benefits to Vista’s Spinoff
The Outdoor Products company is designed as a group of brands focused on performance gear and precision technologies. The portfolio includes CamelBak, Camp Chef, Fox Racing, Bell, Giro and Simms Fishing.
The group will be led by Eric Nyman, who began as CEO of the segment on Aug. 21, and a dedicated management team.
The SEC filing lists the benefits from the restructuring, saying the move will allow the company to:
- Dedicate resources to each company’s needs and growth drivers.
- Tailor capital allocation to better suit each brand’s distinctive business model and long-term goals.
- Strengthen the ability to attract and retain top talent for each company’s strategic and operational objectives.
- Create compelling value for stockholders by differentiating the companies.
- Expand opportunities for M&A in the outdoor recreation products marketplace.
Risks of the Move
In identifying risks, Vista acknowledged that the spinoff could divert management’s attention away from the day-to-day of running a business. The separate companies could also be more prone to economic and market fluctuations than they were under the larger, more diversified umbrella of the parent company.
On top of that, the Outdoor Products segment will lose the advantages of scale, purchasing power, credit rating, borrowing leverage, and available capital that it had under Vista. The outdoor company will also lose the administrative and operational benefits it enjoyed as part of the larger company, and many of these parts of the business will cost more as a smaller company.
The Outdoor Products company is made up of 34 brands. The company views its core customers as hikers, campers, cyclists, off-road riders, skiers, snowboarders, backyard grillers, golfers, anglers, and hunters.
Aside from the brands with an established presence in the market, such as CamelBak and Bell, the company sees e-bike maker QuietKat as a high-growth brand that is “capturing changing consumer preferences and leading technological advances.”
Vista Outdoor has completed seven acquisitions since 2020. The company allocates capital to attractive markets and complementary brands to build its portfolio and broaden its consumer base.
At the same time, it maintains “a founder’s mentality,” giving brands the autonomy to continue running and growing their businesses.
When evaluating potential companies to acquire, Vista uses four main criteria:
- Acquire in existing and adjacent spaces.
- Acquire brands that resonate with consumers.
- Acquire businesses where we can add value and have a clear path to synergies.
- Acquire businesses at attractive multiples that are accretive to our company valuation.
Centers of Excellence
Vista operates with three main tiers for its Centers of Excellence, a methodical approach it shares across its verticals.
The goal is to leverage its shared resources, expertise, and scale to achieve a level of excellence difficult for individual brands to achieve.
The focus is on:
- Operational excellence to improve margins, supply chain resiliency and agility.
- E-commerce, direct-to-consumer, and digital marketing capabilities.
- Acquisition target relationships and selection, deal execution, and integration.
Aside from the Centers of Excellence, Vista highlights four other strategic pillars for growth.
First, the company invests in talent and culture to foster a culture of agility, efficiency, and innovation.
Second, Vista promotes organic growth by allocating capital to its brands to help develop new products for both core consumers and new entrants to the market. Organic growth also comes from expanding distribution channels as well as using the company’si infrastructure to help brands scale.
Third, the company acquires complementary businesses in the “highly fragmented” outdoor recreation products market.
Fourth, Vista strives to maintain a healthy balance sheet, strong margins, and robust cash-flow generation.
Opportunities, Market Conditions
According to research Vista has compiled, both from third parties and in-house, the company sees “significant opportunity for future growth.”
Outdoor Products will represent an estimated $15 billion domestic market in its core, with an estimated total global addressable market in excess of $100 billion, according to Vista.
“With a strong outlook as participation in outdoor activities continues to grow, reaching a record 168.1 million participants, or over 50% of the U.S. population over the age of six, as of 2022,” the company cited in its filing.
“The surge of participation brought on by the COVID-19 pandemic has persisted, as the new participants continue to be engaged despite the return of pre-pandemic activities and routines.”
Vista sees itself as well-positioned to execute more “tuck-in acquisitions” to expand its footprint.
“There were over 1,000 athletic and sporting goods manufacturers in the U.S. as of December 2022, with new companies emerging at a rapid pace,” the company wrote in its filing. “We believe that as an acquirer of choice, we will have many opportunities to continue to expand our strong portfolio of brands.”
Bart Schaneman can be reached at email@example.com.