Remington owner runs low on takeover-defense ammo

Vista Outdoor

25/06/2024 13:00

(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)
 ((For previous columns by the author, Reuters customers can
click on GUILFORD/
Jonathan.Guilford@thomsonreuters.com ; Reuters Messaging:
Jonathan.Guilford. thomsonreuters.com@reuters.net))