Remington owner runs low on takeover-defense ammo
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jonathan Guilford
NEW YORK, June 24 (Reuters Breakingviews) -A Czech garrison is reloading for a U.S. takeover battle. Military equipment maker Czechoslovak Group, or CSG, just sweetened its already agreed offer to buy Vista Outdoor’s VSTO.N Remington ammunition business to ward off a rival bid for the whole company. The seller favors the breakup plan, but the camping- and shooting-gear unit that would be left behind is risky recompense for more cash and a potential regulatory standoff.
Vista first said it would split bullets from outdoor equipment, respectively rebranded as Kinetic and Revelyst, back in May 2022. After much back and forth, the company agreed to sell Kinetic to CSG, giving the buyer control over one of only two outfits that has won a contract to run the U.S. army’s small-caliber manufacturing facility.
The prospect raised an outcry from Republican Senator J.D. Vance and former Secretary of State Mike Pompeo. A review by the Committee on Foreign Relations in the United States, which probes investments and acquisitions from overseas for national security concerns, is taking an extended look and due to render a verdict this week.
Approval would clear a big hurdle ahead of a planned July 2 shareholder vote, but another extension is possible. More daunting, perhaps, is MNC Capital. The buyout shop run by former Vista board member Mark Gottfredson wants to buy all of Vista for $3 billion, but has been repeatedly spurned.
Comparing the offers is tricky. With CSG’s updated entreaty on Monday, Vista owners would receive $18 a share for Kinetic, a $77 million special dividend and the Revelyst rump, which would hold about $250 million in cash. Vista shares are trading at about $34.60 apiece, imputing an equity value of about $970 million for Revelyst.
Gottfredson’s firm is simply offering $39.50 per share for everything. Back out the Kinetic valuation implied by CSG and MNC is paying nearly $1.3 billion for Revelyst, or about $21.50 per share.
Vista says Revelyst’s EBITDA can double by 2025. If so, it would be worth $24 a share on the same 10 times multiple at which peers trade, according to its bankers. This possible profit surge, which has yet to develop during deal negotiations, and valuation forecast would take the place of more money upfront that’s also less politically fraught. It’s a takeover defense low on ammo.
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CONTEXT NEWS
Vista Outdoor said on July 24 that defense company Czechoslovak Group had sweetened its already agreed deal to buy the company’s Remington ammunition brand, offering around $2 billion in cash, which would fund an $18 per share payment to existing stockholders, an expected $77 million special dividend and the balance sheet of the rump.
MNC Capital’s approximately $3 billion offer to buy all of Vista has been repeatedly rejected. The buyout firm on June 6 raised its bid by about 5% to $39.50 per share.
Proxy advisory firm Institutional Shareholder Services on June 20 recommended that shareholders abstain when voting on the proposed CSG transaction, to push Vista to engage with MNC. Glass Lewis recommends in favor of the Czech deal. Vista shareholders are scheduled to vote at a special meeting on July 2.
Editing by Jeffrey Goldfarb and Pranav Kiran
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