Explosive ammo M&A bids leave shareholders with a dilemma
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Is there a magic bullet solution for Vista Outdoor? The Minnesota-based company has two divisions: one that makes gun ammunition and another that sells sporting and outdoor equipment like binoculars. Last autumn it announced a sale of the ammo business to Czechoslovak Group or CSG, a Czech industrial entity, at a value of just under $2bn.
The remaining outdoor goods business, known as Revelyst, is then supposed to remain publicly traded. Vista says the package of cash from the CSG sale and the remaining trading value of Revelyst should be worth in total about $50 per share, or a $3bn equity value.
But the CSG deal has yet to close. Despite the Czech Republic being a Nato member and US ally, right-wing American politicians, including Ohio Senator JD Vance, are urging the Committee on Foreign Investment in the United States to reject the deal on national security grounds.
Stepping into that breach, MNC Capital, the family office of one former Vista director, Mark Gottfredson, has made an all-cash bid for the company at $39.50 per share. Vista shares are trading at just $36 currently.
The situation only got murkier on Monday, when an unnamed investment firm submitted its own offer for the ammo business, attempting to capitalise on CSG’s woes.
The Vista pyrotechnics are just the latest example of when a seemingly innocuous foreign buyer provokes the resistance of American politicians. US Steel has a $15bn deal to sell itself to Japan’s Nippon Steel, a transaction in Cfius purgatory. Even President Joe Biden has voiced his opposition.
Vista said on Monday that it would explore the topping bid it received, which is only higher by about the $48mn termination fee that is owed to CSG. In other words, it may just be the same effective value as CSG’s bid without all the regulatory baggage.
Vista insists that the remainco Revelyst will not only have a boost in ebitda, towards industry-standard margins, but that those profits will trade at healthy multiples. It does not want to forsake that upside to the family office MNC in an all-cash takeover.
Of course, then the company also bears the execution risk of hitting its targets. With the stock still trading at a steep discount to both that theoretical sum-of-the-parts value and even the all-cash bid, Vista shareholders are hardly fired up by much of any of it for now.
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