Alliant TechSystems Inc. is moving forward with plans to spin off its $2.3 billion-a-year sporting business as a publicly traded company as part of a merger of its aerospace and defense businesses with those of Orbital Sciences Corp.
ATK put those plans on ice Oct. 29, a day after an unmanned Orbital Sciences rocket failed during a launch in Virginia that was supposed to support the International Space Station. ATK said last week that it is satisfied with Orbital Science’s recovery plans, which lay out how it will support NASA cargo delivery requirements going forward.
ATK and our Board concluded that based on current information, the execution of the Orbital recovery plan and go-forward plan is likely, said Alliant Techsystems, Inc. EVP and CFO Neal Cohen.
In a conference call last week, ATK President & CEO Mark DeYoung said the transactions are now likely to close in February, 2015. He reiterated the company’s guidance for its Sporting Business, which will be renamed Vista Outdoor when it is spun off as a tax-free dividend to shareholders.
Vista Outdoor will be headquartered in Utah and its stock is expected to trade on the New York Stock Exchange under the ticker symbol VSTO. The company will have approximately 5,800 employees across the U.S. and internationally and annual sales of more than $2.0 billion. In the third quarter, about 73 percent of the segments revenue came from firearms and ammunition sales, while the balance came from the optics company Bushnell. The segment’s brand portfolio includes Federal Premium, Bushnell, Savage Arms, Blackhawk!, Primos, Final Approach, Uncle Mike’s, Hoppe’s, RCBS, Alliant Powder, CCI, Speer, Champion Targets, Gold Tip Arrows, Weaver Optics, Outers, Bolle, Cebe, and Serengeti.
“We expect the two-year organic revenue compound annual growth rate for FY13 through FY15 in the high-single, low-double digits, consistent with long-term growth trends,” DeYoung said of the outlook for the Sporting Business. “In FY16, we expect to see a recovery from current market conditions and a return to modest growth, with that growth occurring in the back half of the year, said DeYoung.
When asked about maintaining margins and pricing, DeYoung said that ATK is leveraging all of the tools in our toolbox to maintain margins but that is going to depend on market conditions and the competition.
DeYoung hinted that Vista Outdoors may expand its investments beyond ammunition and optics to other sectors of the outdoor recreation markets. He noted that 40 million Americans, or about 15 percent of the population, participate in hiking, camping, kayaking, cycling and other categories.
The average participant in outdoor recreation goes on five camping trips a year on multi-day trips and they use a variety of gear, anything from tents to batteries to outdoor lighting and cooking, said DeYoung. I think the broader outdoor recreation market is a growth market.
Following the spinoff, Vista Outdoor will focus on “returning to high-single digit organic growth that is consistent with long-term market dynamics, while delivering additional growth from focused, strategic acquisitions that create value, said DeYoung.
