Vista Outdoor (VSTO, Financial) has two potential M&A routes. Today, Czechoslovak Group (CSG) increased its purchase price for VSTO's Kinetic Group to $2.1 billion from $2.0 billion. This deal would streamline VSTO, offering shareholders $21.00 per share, a $3.00 increase from CSG's previous offer.
Last week, MNC Capital proposed an all-cash acquisition of VSTO at $42.00 per share, a 14% premium over Friday's closing price. This offer, announced on June 26, represented a 25% premium to VSTO's price at that time and was an increase from MNC's earlier offer of $39.50 per share.
With two offers on the table, VSTO faces a critical decision.
- The Kinetic Group, making up over half of VSTO's annual sales, focuses mainly on ammunition brands. However, this segment has underperformed, showing a 17.4% decline in sales year-over-year in FY24 (Mar).
- VSTO's Outdoor and Adventure segments, which account for most of the remaining revenue, also saw declines of 2.3% and 2.8% year-over-year, respectively. Investors may prefer MNC's complete buyout offer, as VSTO's other brands have struggled independently.
- MNC's $42.00/share offer is an all-cash deal, simplifying the transaction and likely capping share prices at that level in the short term. Since MNC plans to take VSTO private, there may be fewer regulatory hurdles compared to the CSG deal.
- Despite this, VSTO has consistently rejected MNC's offers. The Board favors the CSG merger, arguing that MNC's offer undervalues VSTO and that the CSG deal provides $7-16 more per share to investors.
Given the uncertainty, a wait-and-see approach may be best. VSTO leans toward a merger, which might not be as appealing to shareholders as MNC's offer, possibly leading to profit-taking.
