On July 30, 2024, Vista Outdoor announced that it is exploring strategic alternatives for its outdoor sporting gear business – Revelyst. The company is open to selling the business and is engaging with potential buyers, including Czechoslovak Group (“CSG”) and investment firm MNC Capital (“MNC”). Vista Outdoor expects MNC to raise its existing $3.2 billion buyout offer in the near future and is considering separating Revelyst and The Kinetic Group through a spin-off as an alternative option.
Vista Outdoor previously entered into a definitive agreement to sell its Sporting Products business, to be rebranded as The Kinetic Group, to CSG for $2.2 billion in all cash. This agreement provided Vista Outdoor shareholders with a higher cash payout of $24.00 per share. Despite this, Vista rejected MNC Capital’s buyout offer of $42.00 per share, citing that it undervalued the company, especially the Revelyst business. Proxy advisory groups viewed MNC Capital’s offer as superior and urged Vista to reconsider and engage with MNC.
Vista Outdoor has adjourned its special shareholders’ meeting multiple times and has now set September 13, 2024, as the next meeting date. The company’s overall enterprise value is estimated to be around $3.9 billion based on CSG’s $2.2 billion offer for the Sporting Products business and an implied $0.6 billion value for Revelyst. To top CSG’s offer, a potential competing bidder like MNC Capital would need to increase its bid by more than 20%.
The deal rationale behind the separation of the Outdoor and Sporting Products divisions was based on the company’s inability to capture untapped potential and trade at a multiple comparable to peers. The management believes that separating the businesses will allow each to pursue its own investor base, capital allocation strategy, and strategic focus. The move was also influenced by a need to protect the company’s reputation in the wake of negative investor perception of its firearm manufacturing business.
Vista Outdoor’s Sporting Products division is thriving in a tough business climate, and Vista Sporting anticipates robust growth driven by increased demand for firearms, ongoing wars, and a growing number of shooting sports enthusiasts. The division’s prolonged government contracts and recurring revenue provide stability in a volatile commercial marketplace. The company expects the division to have a healthy cash flow outlook and significant revenue growth from government contracts in the near future.
Overall, Vista Outdoor is at a crucial point in its decision-making process regarding the sale of its outdoor sporting gear business. The company is weighing offers from potential buyers, including CSG and MNC Capital, while also considering the option of separating Revelyst and The Kinetic Group. Shareholders are eagerly awaiting the outcome of the strategic review and the next special shareholders’ meeting scheduled for September 13, 2024.
