Vista Outdoor, Inc. reported late on June 26 that it received regulatory approval from an interagency committee of the U.S. government for the proposed sale of its ammunition business, The Kinetic Group, to Prague-based Czechoslovak Group a.s. (CSG).

Receipt of clearance by the Committee on Foreign Investment in the United States (CFIUS) cleared a major obstacle to the sale to CSG and consequent separation of its Revelyst outdoor products business into a standalone public company. Vista stated, “Vista Outdoor and CSG received written notice from CFIUS that CFIUS has concluded its review and investigation of the Transaction and has determined that there are no unresolved national security concerns. CFIUS clearance was the final regulatory approval required under the merger agreement with CSG for the closing of the transaction.”

CFIUS reviews certain transactions involving foreign investment in the United States to determine their effects on U.S. national security.

The approval comes as the Institutional Shareholder Services (ISS) changed its opinion on June 20 from recommending shareholders approve CSG’s $1.96 billion purchase to abstaining from voting on the deal due partly to “the regulatory risk surrounding the CSG offer for Kinetic.” The proxy advisor also cited the “valuation uncertainty” of the stand-alone Revelyst business and the alternative offer by MNC Capital to acquire Vista’s entire business.

On June 24, Vista reported that CSG had increased its bid for Kinetic, which includes the Federal, Remington, CCI, Hevi-Shot, and Speer ammunition brands, by $40 million from $1.96 billion to $2 billion.

In a statement that arrived at 5:46 p.m. EST on May 25, Michael Callahan, chairman of the Board of Directors, said, “We are very pleased that CFIUS has carefully vetted the transaction and, as we expected, determined that there are no unresolved national security concerns.”

Callahan added, “The CFIUS process involved a thorough review and investigation of the Transaction by numerous U.S. Government departments and agencies with a range of national security and other mandates. We believe the end result supports our view that CSG—which has deep expertise in supply chain excellence and ammunition manufacturing and strong support for NATO and allied nations—will be an excellent owner of The Kinetic Group. CSG is fully committed to supporting our American workforce, American hunters and domestic and allied military and law enforcement partners.”

The Czech group’s offer had sparked warnings from Republican politicians about putting a leading U.S. ammunition supplier under foreign ownership.

CSG’s Owner and Chair, Michal Strnad, rejected the political criticism, noting that the Czech company had received congressional clearance to buy two ammunition factories in the U.S. as part of a separate 2022 acquisition, while his company also has NATO approval as a large weapons supplier. However, Strnad admitted in 2022 that it took his company “seven long months“ to win CFIUS approval to acquire Fiocchi, another arms maker based in Italy.

The Czech group is one of the European arms companies playing a leading role in supplying Ukraine in its war against Russia.

The approval comes as an article posted on Tuesday morning in Politico indicated that the CSG purchase was receiving close attention from the Justice Department’s antitrust lawyers, with the Biden administration making antitrust enforcement a “cornerstone of its economic policy.”

The Politico article states, “In recent weeks, DOJ antitrust lawyers have been meeting with third parties, including law enforcement groups concerned that the deal will lock up the U.S. market for primer, the key ingredient in bullets, according to three people with direct knowledge of the matter. A letter from the National Association of Police Organizations sent last week to Attorney General Merrick Garland also says the DOJ is looking at the deal. The DOJ’s antitrust inquiry is in the early stages according to one of the people, and it couldn’t be learned whether it will lead to a formal probe of the deal.”

MNC Capital, which had offered $37.50 a share, or $3 billion, to buy Vista’s overall business outright, had also argued that the CSG deal would give a foreign-owned company commanding control of the West’s supply of primers, the propellant used in ammunition manufacturing.

On June 10, Vista rejected MNC’s $37.50-a-share offer, which had been upgraded from a previous offer, calling it unfavorable to the CSG spinoff plan.

Vista said in its statement that the closing of the CSG transaction remains subject to receipt of the approval of Vista Outdoor’s stockholders and other customary closing conditions. A special meeting of Vista Outdoor stockholders to, among other things, consider and vote on a proposal to adopt the merger agreement with CSG is scheduled to be held virtually on July 2.

Vista said, “The Board continues to recommend Vista Outdoor stockholders vote in favor of the proposal to adopt the merger agreement with CSG. Vista Outdoor is confident that the Transaction will maximize value for our stockholders by:

  • Providing for a $2 billion purchase price, representing a $90 million increase from the original $1.91 billion purchase price,
  • Allowing stockholders to benefit directly from additional excess cash generated by the company prior to closing,
  • Delivering $18.00 in cash consideration per share at closing, representing a $5.10 increase from the original cash consideration of $12.90 per share, and
  • Enabling stockholders to capture the long-term intrinsic value that is embedded in Revelyst’s business plan as a standalone public company.”

The CSG sale would leave Vista’s non-firearm division, Revelyst, as a standalone public company. Revelyst operates three segments: Adventure Sports (Fox Racing, Bell, Giro, CamelBak, QuietKat, and Blackburn); Outdoor Performance (Simms, Bushnell, Blackhawk, Stone Glacier, Camp Chef, and Primos) and Precision Sports and Technology (Foresight Sports, Bushnell Golf and Pinseeker).

The CSG transaction is expected to close in the calendar year 2024.

Image courtesy Vista Outdoor