Ammo maker’s deal tactics carry trigger warning
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jonathan Guilford
NEW YORK, Sept 24 (Reuters Breakingviews) -Go in guns blazing and it’s easier to miss the target. A $3 billion hostile takeover bid for Vista Outdoor VSTO.N has encountered fierce resistance from the camping-and-ammo outfit, which keeps maneuvering to divest its Remington brand instead. The latest tactics, however, provide an abject lesson in overshooting on defense.
Vista, home to an ammunition business called Kinetic, took aim at a valuation discount in 2022 by seeking to spin off its outdoors-equipment seller, Revelyst. The decision attracted defense contractor Czechoslovak Group, which offered to buy Kinetic. Other suitors came and went, but one remains: MNC Capital, led by former Vista board member Mark Gottfredson, which has steadfastly sought to acquire the entire company for cash.
What started at $35 a share in February is now, after multiple rejections, 23% higher, at $43. The entreaty values Vista at more than $3 billion. It also avoids the risk that Revelyst will suffer as a standalone company, especially with peers trading unevenly of late.
Although Vista deserves credit for squeezing nearly $500 million more out of MNC, it also has determinedly stuck with the breakup plan. The Czech company sweetened its own bid for Kinetic by 13%, to $2.2 billion. Some is new money; some is cash Revelyst itself generated, or which would have bolstered its balance sheet. Either way, Vista investor TIG Advisors, for one, still opposes the Kinetic sale. Vista has delayed a shareholder vote multiple times – most recently on Tuesday morning – and lost the endorsement of advisory firm Institutional Shareholder Services.
The company pulled off a coup by engaging in separate talks to offload Revelyst to a buyout shop that is working with, and partly financing, MNC. This $1.1 billion mystery bid is contingent on Kinetic being sold, too. Add it to the Kinetic price tag, adjust for some $550 million of net debt, and combined it would be worth roughly $46 per share, $3 more than MNC’s entreaty.
And yet in attempting to prove Revelyst’s attractive upside, Vista accepted a $150 million minority investment in the unit from Czechoslovak Group. The implied $2 billion valuation is eye-popping: Vista’s entire market capitalization is $2.3 billion, and Revelyst accounts for less than half its revenue. This ploy helps justify the company’s own optimism, but also looks like a poison pill by setting a price no suitor can match. Moreover, if a deal for the whole company falls through, it might undermine the board’s claim of a reasonable negotiation, giving potential copycats a fair trigger warning.
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CONTEXT NEWS
Vista Outdoor on Sept. 24 postponed a shareholder vote on the sale of its ammunition segment, which includes the Remington brand, to defense company Czechoslovak Group. In the latest of multiple delays, the special meeting that had been rescheduled for Sept. 27 is now provisionally set for Oct. 9.
The agreed buyer sweetened the terms of its offer on Sept. 13 to $2.15 billion, increasing the upfront cash paid to shareholders and agreeing to invest $150 million in Vista’s remaining outdoor equipment unit, Revelyst, at an implied valuation of $2 billion.
Investment firm MNC Capital has sought to buy all of Vista in partnership with an undisclosed buyout shop in a roughly $3 billion deal. Vista said on Sept. 18 that it had held separate conversations with MNC’s partner about a potential transaction involving Revelyst.
The takeover target subsequently disclosed that the buyout firm is only interested in a deal in which all of Vista is sold at once, and will not entertain a standalone acquisition of Revelyst.
Morgan Stanley is advising Vista Outdoor while Moelis is advising the company’s independent directors.
Editing by Jeffrey Goldfarb and Pranav Kiran
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