Beretta Holding S.A., which has acquired a 9.95 percent stake in Sturm, Ruger & Company, Inc since last fall, reported it has made an offer to acquire up to 20.05 percent of Ruger’s outstanding shares at a premium.
Beretta, in a letter to Ruger’s board, said it had offered to pay $44.80 per share in cash for the shares, representing a premium of approximately 20 percent to the 60-day average price (volume-weighted average price). On Wednesday, March 25, shares of Ruger closed up $2.79, or 6.9 percent, to $43.53 on the news. Ruger’s shares have risen from $32.65 at the start of the year as Beretta has launched a proxy fight against the company by nominating four candidates for board seats ahead of its upcoming shareholder meeting.
In its letter, Beretta asked Ruger’s board to exempt the transaction from Ruger’s shareholder-rights plan, or poison pill, adopted last fall. The exemption would allow Beretta to increase its beneficial ownership to up to 30 percent through the tender offer.
Sturm Ruger confirmed that its board had received Beretta’s proposal. Ruger said its board would review it with its advisers and respond in due course, adding that shareholders do not need to take any action at this time.
The latest development follows weeks of increasing public disagreement between the companies. Earlier this month, Ruger said Beretta was seeking to gain control through discounted share purchases and outsized governance rights, after building its stake to nearly 10 percent and nominating four directors to the board.
Ruger additionally charged that Beretta had outlined a long-term plan to combine the two businesses and proposed that Ruger issue additional shares at a discount, thereby allowing Beretta to increase its stake while obtaining disproportionate board representation. Ruger said it adopted the poison pill to guard against a potential creeping takeover.
Beretta has denied those claims, saying it was not seeking control and had instead pursued a negotiated minority investment to improve Ruger’s performance. It described Ruger’s characterization of the discussions as false and misleading, and said it remains open to a negotiated outcome.
In a press release on Wednesday, March 25, Beretta accused Ruger’s board of acting defensively and said shareholders should be allowed to determine whether to accept the tender offer.
Beretta said, “From the outset, Beretta Holding has been clear about the desire to make a more meaningful investment in the company, further enhancing alignment with all shareholders; however, the Ruger Board responded by immediately and defensively standing in the way.”
In asking Ruger’s board to grant an exemption to the company’s poison pill rights plan, to allow Beretta to acquire ownership of up to 30 percent of Ruger’s shares at a premium, Beretta said it was “providing shareholders with the opportunity to decide for themselves” on a partnership with Beretta.
Beretta stated, “Beretta Holding firmly believes that shareholders deserve to determine whether they want to partner with a highly aligned, long-term strategic investor with deep industry expertise, or maintain the status quo under a Board whose members collectively own less than 1 percent of the company’s outstanding shares and whose tenure has coincided with significant value deterioration.
The Luxembourg-based firearms giant added, “Beretta Holding has constantly sought to engage in constructive, good-faith discussions with the Ruger Board and remains open to continued dialogue in the best interests of both companies and their stakeholders.
“Contrary to certain portrayals, Beretta Holding cannot be considered as a direct competitor of Ruger within the U.S. market. The majority of its sales in the U.S. are focused on shotguns and related products, as well as ammunition and optics. While the group and its subsidiaries also offer rifles and pistols, these categories represent a relatively minor portion of its U.S. business. Furthermore, within the rifle and pistol segments, the Group’s products are positioned differently from those offered by Ruger, and as such, they are not direct competitors in these areas.
“Beretta Holding has been active in the United States for more than 50 years, with a presence built through continuous investment. Today, the Group operates nine entities employing close to 700 people across the country. This long-standing commitment reflects a deeply rooted industrial partnership in the U.S. market – contrary to portrayals suggesting a typical foreign investor.”
Ruger is scheduled to hold its annual shareholders’ meeting virtually on Thursday, May 29.
Image courtesy Beretta
