Vista Outdoor announced that it planned to sell its Sporting Products business to the Czechoslovak Group (CSG) for $1.91 billion, shifting from a planned spinoff of its Outdoor Products segment. Gary McArthur, interim CEO, said, “We believe this creates meaningful value for stockholders and sets up both Sporting Products and Outdoor Products for long-term success.”
Vista Outdoor also slashed its guidance for its fiscal year ended March 31, 2014, due to particular weakness in its Outdoor Products segment. Share fell $7.78, or 23.7 percent, on Monday to $25.02. The stock’s 52-week range is between $22.97 and $33.78 per share.
On the call, McArthur noted that Vista in May 2022 announced a plan to separate the Outdoor Products and Sporting Product segments into two independent publicly traded companies to “unlock significant stockholder value.” He noted that Vista’s stock currently trades at mid-single digits enterprise value to FY24 EBITDA, which is in line with ammunition and sporting company peers. Pure-play outdoor products-focused peers tend to trade at a premium to that. McArthur added, “After the separation, we expect the Outdoor Product segment to trade at a multiple more comparable to its Outdoor Products-focused peers.”
He said the board had considered a number of alternatives to maximize value for stockholders, including a spinoff of the Outdoor Product segment into an independent-publicly traded company and a tax-efficient sale of the Sporting Product segment.
A number of hires were made to support the spin-off, including Eric Nyman, former COO and president at Hasbro, as president of the Outdoor Products segment. Sequential margin improvement has also been made at the Outdoor Products segment since the fiscal fourth quarter of 2023. Refinancing activities and other steps to prepare for the spin-off were also taken.
At the same time, McArthur said the board ran a process to explore a potential sale of the Sporting Product segment and talked to a “large number of qualified buyers.” Since Vista’s last quarter call in late July, the board evaluated offers and decided a sale to CSG was “the best strategic alternative for maximizing stockholder value due to the certainty of value delivered, the payment of cash consideration to stockholders and the ability to capitalize the Outdoor Products’ balance sheet with cash to accelerate its capital allocation strategy and grow the value of the Outdoor Products business faster than previously expected.
He said CSG, based in Prague, the capital city of the Czech Republic, is a leading industrial technology holding company that operates five business segments with more than 100 companies and 10,000 employees worldwide across manufacturing, development and commercial categories.
CSG has agreed to pay $1.91 billion in cash on a cash-free, debt-free basis with the deal expected to close in the current calendar year, subject to shareholder and regulatory approvals and other customary closing conditions.
No Management Changes Planned At Vista’s Sporting Goods Segment
Upon closing, Jason Vanderbrink will remain CEO of the Sporting Products business and the U.S. headquarters will remain in Anoka, MN. In connection with the transaction, the company’s approximately 4,000 employees who represent four factories and the consumer brands CCI, Federal, HEVI-Shot, Remington and Speer will continue as well as the segment’s support of community and conservation support through local and national organizations.
“The sale was porting products to CSG is a great outcome for our company. It creates meaningful value for our stockholders and gives our brands a strategic long-term home less exposed to the continued pressures of the public sector,” said Vanderbrink on the call. “CSG is a world-class company with experience in our industry. They have shown continued growth and innovation and are the right owner of our iconic brands. CSG is based in Prague and is fully committed to our iconic American brand and expanding our legacy of U.S. manufacturing and our support of hunting and shooting heritage.”
Vanderbrink stressed that the Sporting Products segment’s management team will remain intact, also including Allan Kerfeld as CFO and Jeff Ehrich as general counsel and corporate secretary. Vanderbrink said, “Our team will continue to focus on making the best, most innovative ammunition in the world for all of our consumers. We have a very bright future ahead of us.”
Added Michal Strnad, CEO of CSG, in a press release, “Jason and the Sporting Products leadership team have a strong heritage of delivering high-quality products, and we are pleased to welcome them to the CSG family of companies as we partner to support their next chapter. We look forward to building on the company’s success in delivering innovative, quality products and are confident in the long-term value we can create together. We are committed to expanding their legacy of U.S. manufacturing and providing resources to accelerate their growth.”
Transaction Details
The transaction values the Sporting Products business at an enterprise value of $1.91 billion, on a cash-free, debt-free basis with a normalized level of working capital, and is supported by $1.11 billion of fully committed debt financing with the remaining amount funded by CSG.
Andrew Keegan, VP and interim CFO, said the valuation is approximately five times the enterprise value to the Sporting Products’ segments’ FY24 EBITDA, including estimated standalone costs, which Vista believes in line with current trading multiple and a multiple of ammunition and sporting group peers.
To effect the transaction, Vista Outdoor will separate its Outdoor Products business from its Sporting Products business, and CSG will merge one of its subsidiaries with Vista Outdoor (holding only the Sporting Products business), with current public stockholders of Vista Outdoor receiving shares of Outdoor Products, recently rebranded as Revelst, and approximately $750 million in cash in the aggregate. The transaction will be treated as a taxable sale of a stockholder’s Vista Outdoor shares for the Outdoor Products shares and cash consideration they receive in the merger, allowing stockholders to recover tax basis and recognize built-in gain and loss in their Vista Outdoor shares.
Relative to a divestiture of Sporting Products as an asset sale, this structure has a corporate-level tax of approximately $50 million versus approximately $380 million for a divestiture as an asset sale and allows for the tax-efficient return of cash to stockholders.
Vista’s Outdoor Products Segment To Become Revelyst
Upon completion of the sale of the Sporting Products business to CSG, Vista Outdoor’s Outdoor Products business will become Revelyst Inc. and trade on the New York Stock Exchange under the ticker “GEAR.”
Nyman, in its seventh week at Vista, expressed his enthusiasm on the call over Revelyst.
“I am energized to lead this company and believe we have the potential to become the greatest house of outdoor brands in the industry,” said Nyman. “Our performance gear and precision technologies are unmatched in the marketplace. And with a culture rooted in ownership, empowerment, accountability, and trust, there is no limit to what is possible.”
Nyman noted that Revelyst is “seeing short-term factors impact consumer demand and softer order patterns for the back half of our fiscal year 2024. Knowing that, we will be decisive in setting up Revelyst for success as a separate, publicly traded company.”
He noted that in April 2023, Vista announced a $50 million cost restructuring program, of which a significant amount of cost savings was realized in the Outdoor Products segment that is essentially completed. To further its cost and performance optimization goals, Vista has engaged a consulting firm to explore additional cost savings and performance improvement initiatives across Revelyst’s technology stack, real estate, supply chain, and organizational structure. Nyman said, “Early indications from the analysis are promising, with expectations that a significant increase to the $50 million cost reduction program implemented in Q4FY 23 can be identified.”
Nyman added that Revelyst remains committed to delivering on its goal of reaching mid-teens EBITA margins, including estimated corporate standalone costs. He said Keegan has agreed to join Revelyst as its permanent CFO.
