Vista Outdoor, a leading parent company that specializes in sporting and outdoor products, announced on July 30, 2024, that it is exploring strategic alternatives for its outdoor sporting gear business – Revelyst. The company’s board of directors is open to selling Revelyst and is engaging with potential buyers, including the Czechoslovak Group (CSG) and investment firm MNC Capital. Vista Outdoor has also considered separating Revelyst and The Kinetic Group through a spin-off as a third alternative. CSG had earlier made a $2.2 billion offer for Vista Outdoor’s Sporting Products business, which includes ammunition brands like Federal and Remington.
The acquisition of The Kinetic Group, Vista Outdoor’s Sporting Products division, by CSG was initially valued at $1.9 billion in an all-cash deal but has been revised to $2.2 billion. This agreement provided Vista Outdoor shareholders with a higher cash payout upon the transaction’s closing. Meanwhile, Vista Outdoor has been engaging with MNC Capital since 2022, with MNC making multiple all-cash offers to acquire the company, with the latest offer being $3.2 billion, which was rejected by Vista Outdoor as undervaluing the company, especially the Revelyst business. Proxy advisory groups have deemed MNC Capital’s offer to be superior and have urged Vista Outdoor to consider it.
Vista Outdoor has adjourned its special shareholders’ meeting multiple times and announced September 13, 2024, as the next meeting date, where shareholders will vote on the proposed transactions. The overall enterprise value of Vista Outdoor is estimated to be around $3.9 billion, with CSG’s offer for the Sporting Products division valuing it at $2.2 billion. To compete with CSG’s offer, potential bidders like MNC Capital would need to increase their bid by more than 20% to be considered.
The sale of the Sporting Products division is a part of Vista Outdoor’s strategy to separate its Outdoor and Sporting Product businesses into two distinct entities. This move aims to allow each business to pursue its individual investor base, capital allocation strategy, and strategic focus. The decision is also guided by the need to limit any negative investor perception due to Vista Outdoor’s involvement in the ammunition business. The separation is expected to bring differentiated and compelling investment opportunities for both businesses.
Revelyst Inc., the spin-off entity of Vista Outdoor, has been growing primarily through acquisitions and their integration. However, the company’s past acquisitions have not made a substantial contribution to its growth, leading to margin contractions. While Vista’s Sporting Products division, The Kinetic Group, is thriving in the ammunition market with strong demand and recurring revenue from government contracts, the company faces challenges due to industry dynamics and macroeconomic conditions impacting organic growth and profitability margins.
Based on valuation analysis, CSG’s offer for Vista Outdoor’s Sporting Products division values it at $2.2 billion, equating to a $24 per share valuation for shareholders. Vista Outdoor expects potential competing bidders like MNC Capital to increase their bids by more than 20% to be competitive. The company aims to unlock value for its shareholders through the strategic review of its business segments and is evaluating various options to maximize shareholder value amidst changing market conditions.
