Vista Outdoor Rejects MNC's Final Offer in Favor of CSG Deal

Vista Outdoor has decisively chosen to solidify its $2.1 billion deal with Prague-based CSG Group, despite MNC Capital's higher $3.2 billion offer.

Published July 09, 2024 - 00:07am

4 minutes read
United States

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Vista Outdoor Inc., an Anoka-based company known for its outdoor sports and recreation products, has affirmed its commitment to a substantial $2.1 billion deal with the Prague-based CSG Group, triumphing over a higher bid from MNC Capital. The Board of Directors has declared that MNC's ultimate proposal, while financially more significant at $3.2 billion, fell short in various critical dimensions.

According to Vista, MNC Capital's final offer was described as 'inadequate and opportunistic,' fundamentally undervaluing the company's outdoor brands unit, Revelyst. Vista's shareholders will convene on July 23 to vote on the CSG deal, which has already seen the offer increased multiple times, now standing at $2.1 billion, up from an initial proposal of $1.91 billion presented in October.

Vista's decision to side with CSG comes amid significant discussions among its shareholders and a series of competitive bids from both CSG and MNC. The contested acquisition talks underline the strategic significance of Vista's extensive portfolio, which includes prominent names like Federal, Remington, Bell, Fox, and CamelBak. The CSG transaction has gained necessary clearance from the Treasury Department's Committee on Foreign Investment in the United States, highlighting the complexity and geopolitical sensitivity of the deal.

MNC's final offer, valued at $42 per share, was consistently pushed as a preferable option by U.S.-based investors at MNC, who argued it would face less regulatory scrutiny and close more rapidly. However, Vista's Board remains steadfast, emphasizing the strategic and long-term benefits secured through the CSG deal, which promises immediate value and capital injection into Revelyst, projected to stand alone as a publicly traded company with $250 million in net cash.

The Board has articulated several core motivations behind endorsing CSG over MNC. Firstly, it highlights that the CSG proposal crystallizes 'significant value and mitigates future market risk' for Vista Outdoor's ammunition brands. Financial advisors from Morgan Stanley & Co. LLC and legal advisors from Cravath, Swaine & Moore LLP, along with additional consultancy from Moelis & Company LLC and Gibson, Dunn & Crutcher LLP for the independent directors, have been instrumental in fortifying the Board's unanimous recommendation.

The CSG transaction also promises a separation of The Kinetic Group and Revelyst, providing shareholders with both immediate cash and new opportunities for growth and strategic ventures within the outdoor products segment. This transaction, crafted through a rigorous and exhaustive competitive sale process involving 26 potential buyers, is projected to generate substantial value with the assurance of regulatory approvals and other customary closing conditions expected to be settled by the end of July.

Revelyst's future as an independent entity is also an enticing prospect for shareholders. Vista anticipates doubling Revelyst's EBITDA by fiscal year 2025, with cost-saving measures forecasted to exceed $100 million by fiscal year 2027, positioning it to achieve mid-teen EBITDA margins in the long term. This strategic outlook is integral to the board's rejection of MNC's proposal, which, despite thorough engagement and extensive document sharing, failed to eclipse the benefits encapsulated in the CSG deal.

Highlighted within the Board's letter to MNC, the counsel's analysis and financial advisories stress that MNC's offer significantly undercuts Revelyst's future growth trajectory and potential to command a premium in a future change of control scenario. Furthermore, the anticipated prolonged time frame for closing an MNC deal, requiring additional due diligence, stands in contrast to the ready-to-execute CSG plan. While MNC's funding relies heavily on Vista's own cash generation, CSG's delineation offers a more secure and expedient realization of Vista's strategic vision.

Vista concludes that the CSG deal not only cements significant immediate shareholder value but also aligns with a robust, forward-looking strategy to keep shareholders engaged and capitalizing on growth opportunities within Revelyst. The detailed analysis, facilitated by thorough financial and legal advisory processes, underpins a confident and unanimous board decision aimed at maximizing shareholder value in a volatile market landscape.

This ongoing corporate maneuvering, with heavyweight financial implications and strategic foresight, will be settled in the upcoming shareholders' meeting, setting a definitive future path for Vista Outdoor and its diverse and expansive portfolio.


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