The decline occurs after the backlash. Following a series of mass shootings in the US, investors avoided buying guns, putting pressure on sporting goods companies like Vista Outdoor to keep their outdoor products — like golf or croquet — separate from their albatross ammo operations. As its valuation has dropped, Vista's bid is currently sandwiched between a former insider and a deal partner from the Czech Republic, which is raising national security concerns. Small-caliber military producers face an uncertain future as a result of being shut out of markets.
Gun manufacturers have few buyers as large buyout shops are wary, and investors such as pension funds have reduced their exposure to firearms. Since 2022, Vista has made an effort to divest its firearms division, Kinetic, with the original plan being to separate its outdoor division from the 208-year-old Remington ammunition company. However, the Czechoslovak Group, which was established after the split of the now-independent countries, sprung into action in 2023 and made a $1.9 billion acquisition of Kinetic.
The small-arms industry is being reduced by foreign acquirers. In 2022, CSG acquired 70% of Fiocchi Munizioni, an Italian business. Remington, Fiocchi and Olin dominate primers, the explosive component of bullets, which are produced in only six American plants. The Lake City Army Ammunition Plant provides supplies to the military, and Remington and Winchester are competing for this contract.
Senator J.D. Vance and other politicians are worried about the CSG deal. The US Committee on Foreign Investments is conducting an investigation; in order to give the interagency group more time, the corporations refiled with it on Thursday. According to Vista, companies are still hopeful about getting approved and are actively interacting with CFIUS.
Due to these problems, an unusual bidder has emerged from the shadows: Mark Gottfredson, a former director of Vista, whose MNC Capital placed a hostile bid for the entire company last week. Its deal is worth more. Although the CSG's plan eliminates Vista's debt, distributes $750 million in cash to shareholders, and may set aside $150 million as a special dividend, Roth analysts estimate that this only adds up to roughly $15.50 per share, leaving investors with a small outdoor business. With MNC's offer, they receive cash, at $37.50 a share, and also a way out.
It's possible that MNC can eventually generate revenue from a spinoff that Vista could have managed by itself, but It is not the responsibility of stockholders to give up. Before announcing its separation, LSEG reported that Vista, which gets about half of its income from Kinetic, saw a decline in its enterprise value from around 10 times projected EBITDA in 2016 to slightly over 4 times in 2022.
Ahead of a shareholder vote on May 16, pressure is increasing due to scrutiny and CFIUS delays. Remington's existence is a hostage to this unique dispute, which, regardless of the result, points to a larger issue: the small-arms business is a capital-market backwater despite being vital to the military as well as security agencies. This deal could have sparked a bizarre bidding battle. However, the sector needs to pay greater attention when it comes to providing ammunition for actual wars.