The competition to acquire some or all of Vista Outdoor heated up this week as the company delayed a special shareholder meeting on the matter by a week and released preliminary financial results that could make it more difficult for the board-approved Czechoslovak Group (CSG) transaction to go through.
Shareholders will now vote on July 30 on whether it will approve a new offer from CSG, which increased its offer by $50 million to $2.15 billion, for The Kinetic Group, Vista’s ammunition arm. Vista also determined that approximately $125 million in additiional cash should go to Vista shareholders after reviewing the strategy for Revelyst, which is the new name for Vista’s outdoor business.
“Based on the amended merger agreement with CSG, Vista Outdoor stockholders will receive at the closing of the CSG Transaction, $24.00 per share in cash and one share of Revelyst common stock, in each case, per share of Vista Outdoor common stock,” said the release.
MNC Capital, which is vying to acquire all of Vista Outdoor and take it private, said it was committed to its $42 per share offer, and that with Vista’s approval, it would make a tender offer directly to shareholders. Vista issued a press release in response claiming that MNC “misled investors” with its statement and that it did not require approval to make a tender offer.
“For the avoidance of doubt, the Vista Outdoor Board has already rejected MNC’s proposal,” said Vista’s release. “Vista Outdoor does not support MNC’s proposal and firmly believes that the transaction with Czechoslovak Group a.s. (“CSG”) is superior.”
On Tuesday, Bloomberg reported that a Vista shareholder filed a lawsuit accusing the company’s board of prioritizing its “professional reputations” over the quality of the transaction with CSG, and that it abandoned its original plan to spin off the The Kinetic Group into a standalone business.
“Following a secret process that notably included the resignation of the company’s CEO, the board pulled a bait-and-switch on the company’s long-suffering shareholders and approved the sale of the company’s crown jewel,” the lawsuit says.
Read The Daily’s primer about the Vista Outdoor sale saga here.
Revelyst Preliminary Results Could Impact CSG Transaction, Analyst Says
According to Vista Outdoor’s preliminary financial results:
- The Kinetic Group’s sales are expected to be between $368 million and $372 million in the quarter ending June 30. The decline from $377 million for the same quarter in the previous year was driven by lower shipments across nearly all categories, partially offset by increased price.
- Revelyst’s sales are expected to decrease to a range of $272 million to $276 million from $317 million for the same quarter a year ago. Vista attributed the decline to $13 million of orders expected in Q1 shifting to Q2 due to challenges related to shipping and a delay in introducing new products.
Anna Glaessgen, a senior analyst at B. Riley Financial who covers Vista Outdoor, noted in a Monday memo to investors that Revelyst’s preliminary sales results are a 14% decline year over year, as opposed to its previous guidance estimating low single-digit declines. And even with the $13 million accounted for due to shipping issues, it’s still a 9% decline at the midpoint of the preliminary sales.
“That’s still below the low single-digit growth that was projected by the company when they reported their fiscal fourth quarter,” Glaessgen said in an interview with The Daily.
Those results could jeopardize Vista’s plan to sell Kinetic to CSG, she said, because that deal ultimately relies on the go-forward financial assumptions of Revelyst as a standalone company.
So if Vista is able to achieve the long-term target that they’ve provided for Revelyst, including mid-teens EBITDA margins, then pursuing the CSG deal and leaving Revelyst as a public company makes more sense than the $42 per share offer from MNC.
“That said, given the underperformance versus expectations of Revelyst’s first quarter, naturally that could apply a bit more skepticism in investors’ minds to the ultimate likelihood of achieving a long-term target that Revelyst has provided,” Glaessgen said. “So getting total takeout at $42 a share (with the MNC deal) could become more attractive than pursuing the CSG deal. Ultimately, the value of Revelyst is subject to inherent risks, given (it is unknown) how it will actually perform as a standalone company on the public market, market conditions beyond their control, category trends, etc.”
Vista’s fiscal year 2025 total sales are projected to be in the range of $2.665 billion to $2.775 billion. The Kinetic Group’s sales are expected to be $1.425 billion to $1.475 billion, and Revelyst’s sales are projected to be $1.240 billion to $1.3 billion.
Shareholder Meeting Postponed to July 30
Vista urged shareholders to consider CSG’s new, higher bid for The Kinetic Group. Its shareholder meeting has been postponed to July 30.
At least two large institutional shareholders of the company and a shareholder advisory group have indicated that they would not support CSG’s previous offer of $2.1 billion:
- Gates Capital, which owns 5,589,041 shares (or 9.6%) of Outdoor Vista, said in a letter to the board of directors that the previous $2.1 billion offer was too low.
- TIG Advisors, an institutional investor with 532,000 shares, said Friday that it would vote against the proposal.
- Institutional Shareholder Services (ISS), an independent proxy advisory firm that advises large shareholders, also recommended shareholders vote against the sale of the ammo business to CSG.
Vista will host its full quarterly earnings conference call on August 6 at 9 a.m. ET.
