Vista Outdoor Inc. (NYSE: $VSTO) is the parent company of over 40 renowned brands. It designs, manufactures, and markets exceptional sporting and outdoor lifestyle products worldwide. Their portfolio encompasses trusted names appreciated by outdoor enthusiasts such as CCI, Remington, and Federal.
On Monday, Vista Outdoor released a statement advising investment firm MNC Capital Partners to raise its $3 billion acquisition offer, stating that the current bid undervalues Vista’s performance gear business.
The development comes as Vista is already engaged in a $1.9 billion merger deal with Czechoslovak Group (CSG), a Czech defence company. Vista had agreed to this deal in October 2023, following its decision to spin off the sporting goods unit in 2022.
MNC Capital’s Unsolicited Bid
In March 2024, MNC Capital made an unsolicited all-cash bid of $35 per share, valuing Vista Outdoor at $2.9 billion. Vista promptly rejected the offer, citing that it failed to account for the significant shareholder value expected from separating its outdoor products and sporting goods segments.
MNC Capital subsequently raised its bid to $37.50 per share or $3 billion, prompting Vista Outdoor to engage in discussions with the firm. However, the company has advised MNC Capital that a higher offer is expected.
Vista’s Stance and Shareholder Meeting
Despite MNC Capital’s overtures, Vista Outdoor maintains that the latest proposal is not superior to its existing deal with CSG. The company remains bound by the terms of the CSG merger agreement and continues to recommend that its stockholders vote in favor of the deal.
Given current discussions with MNC Capital, Vista Outdoor has adjourned its special shareholder meeting from May 16 to June 14. The company also expressed confidence in receiving clearance for the CSG merger.
CSG Highlights Benefits of Planned Acquisition
On April 8, CSG underscored the benefits of its planned acquisition of Vista Outdoor’s sporting goods business. The Czech company emphasized its commitment to maintaining production quality, investing in the business, and respecting the legacy American brands under its ownership.
CSG also highlighted its status as a significant NATO and Ukraine supplier, with no ties to adversaries like Russia or China. The company additionally highlighted its current U.S. manufacturing presence and its potential intentions to expand domestic production capacity.
Regulatory Review and Approvals
Both Vista Outdoor and CSG have committed to supporting the regulatory review process. In December 2023, the Federal Trade Commission cleared the acquisition from an antitrust perspective. Additionally, the companies voluntarily withdrew and refiled their joint notice to CFIUS to allow more time for diligence, expressing confidence in securing all necessary approvals.
Vista Outdoor: Q3 2024 Financial Highlights
In Q3 2024, Vista Outdoor reported a $73 million drop in sales to $682 million, marking a 10% decrease from last year. Lower shipments across all categories due to inventory normalization and pricing challenges at The Kinetic Group and Revelyst, subsidiaries specializing in ammunition, hunting accessories, and outdoor recreation products, led to the decline.
Gross profit fell 15% to $203 million, with a margin decrease to 29.7% due to lower volume, higher input costs, reduced pricing at The Kinetic Group, and increased discounting at Revelyst. Operating expenses rose to $383 million, up 169%, mainly due to increased goodwill and intangible impairment expenses, planned separation costs, and non-cash expenses related to contingent consideration’s fair value changes.
Net income decreased to $(148) million, with a margin of (21.7%). Adjusted EBITDA declined to $94 million, with a margin of 13.7%. Diluted EPS decreased to -$2.55 from $1.13 last year, a 326% decrease. Adjusted EPS, excluding certain non-recurring items, fell 37% to $0.80 from $1.27 in the prior year.
Vista Outdoor generated $240 million in cash from operating activities year-to-date, while adjusted free cash flow for the same period amounted to $270 million. The company also witnessed a sequential decrease of $110 million in total debt, which now stands at $835 million, and net debt decreased by $127 million sequentially to $778 million.
Outlook and Guidance for FY 2024
Vista Outdoor reaffirmed its guidance for fiscal year 2024 in its Q3 results. The company expects sales from $2.725 billion to $2.825 billion, with an adjusted EBITDA margin projected to be between 15.50% and 16.25%. Additionally, it anticipates earnings per share in the range of $0.00 to $0.40, with adjusted earnings per share expected to fall within the range of $3.65 to $4.05
Despite the current challenges, Vista Outdoor remains optimistic about its prospects. The company is progressing on the transaction process for The Kinetic Group and expects positive impacts from the GEAR Up transformation program at Revelyst. With a clear path towards achieving cost savings and doubling standalone adjusted EBITDA, Vista Outdoor is focused on navigating the current market conditions and driving sustainable growth in the future.
Vista Outdoor Stock Update
On Monday, Vista Outdoor (VSTO) shares concluded trading at $34.46, a 6.49% increase from the previous closing price of $32.36. Notably, the shares have shown an upward trend of approximately 17% since the beginning of the year. On Tuesday, April 23, the shares were up 1.16% to $34.86 as of 11:53 AM EDT.
With a market capitalization of $2.031 billion, Vista Outdoor has seen a 39.80% gain over the past year, outperforming the S&P 500 52-week Change of 23.06%. The average volume over the past three months stands at 545.99 thousand shares.
As of March 28, 2024, the short interest in Vista Outdoor amounted to 1.23 million shares, reflecting a decrease of 23.66% in short interest change. The short interest of the float stands at 2.46%.
Vista Outdoor: Wall Street’s Moderate Optimism
Wall Street analysts are cautiously optimistic about Vista Outdoor (VSTO), giving it a moderate buy rating. Their average price target for the stock is $32.00, with estimates between $31.00 and $33.00. It suggests a decrease of around 7% from the closing price of $34.46.
Should You Buy VSTO Stock?
Vista Outdoor decisively rejects MNC Capital Partners’ offer, citing the underestimation of their performance gear division. Despite recent drops in sales and profits, Vista maintains its steadfast stance, reaffirming its fiscal year 2024 projections and concentrating on growth strategies such as the GEAR Up transformation program. With shareholder meetings postponed and stock prices indicating optimism, Vista Outdoor navigates hurdles as it prepares to disclose its fiscal 2024 financial outcomes on May 8, 2024.
Click Here for Updates on Vista Outdoor – It’s FREE to Sign Up for Text Message Notifications!
Disclaimer: This website provides information about cryptocurrency and stock market investments. This website does not provide investment advice and should not be used as a replacement for investment advice from a qualified professional. This website is for educational and informational purposes only. The owner of this website is not a registered investment advisor and does not offer investment advice. You, the reader / viewer, bear responsibility for your own investment decisions and should seek the advice of a qualified securities professional before making any investment.