NEW YORK – Gates Capital Management, a significant shareholder in Vista Outdoor, Inc. (NYSE:VSTO), has publicly opposed the sale of Vista's Kinetic Group to Czechoslovak Group a.s. (CSG), advocating instead for the company to negotiate a merger with MNC Capital Partners, L.P. (MNC). Gates Capital, which holds approximately 9.6% of Vista's common stock, expressed its stance following Vista's disclosure of preliminary Q1 2025 financial results and the revised offer from CSG.
On Monday, Vista disclosed CSG's revised proposal and its financial results, revealing a more than 13% drop in sales, a nearly 200 basis point decline in EBITDA margin, and negative segment operating income for the quarter ended June 2024. In contrast, MNC has reaffirmed its $42 per share all-cash offer for the entirety of Vista.
Gates Capital has scrutinized the offers, concluding that MNC's bid would provide shareholders with a more favorable outcome, estimating the offer to be approximately 22x LTM EBITDA for Revelyst, Vista's remaining business after the potential divestiture of the Kinetic Group. This valuation comes amid concerns that Vista may not meet its operating goals for Revelyst.
Additionally, on July 24, Institutional Shareholder Services (ISS), a leading independent proxy advisory firm, recommended that shareholders vote against the CSG merger proposal. Gates Capital also suggests that Vista should update the record date for the shareholder vote, given that the current date of April 1, 2024, no longer reflects the company's current investor base due to significant shareholder turnover.
The opposition from Gates Capital Management is part of a broader dispute over the future of Vista Outdoor, with the shareholder vote on the CSG proposal scheduled for July 30, 2024. Gates Capital has encouraged shareholders who prefer the MNC offer to voice their opinions to Vista's Board of Directors.
Gates Capital Management is an event-driven alternative asset manager founded in 1996, managing over $2 billion in assets for institutional and private clients globally.
Vista Outdoor Inc . has been the subject of multiple acquisition bids. Czechoslovak Group (CSG) has secured regulatory approval for its $2.15 billion offer to acquire The Kinetic Group from Vista Outdoor. The transaction, endorsed by advisory firm Glass Lewis, is expected to close in early August.
On the financial front, Vista Outdoor's recent earnings reports show a sales decrease for its Revelyst division due to shipping challenges and product launch delays. However, the company anticipates a rebound in sales and EBITDA momentum in the upcoming quarters. In line with this, Vista Outdoor plans to return approximately $125 million in cash to its shareholders, translating to an additional $3.00 per share.
InvestingPro Insights
In the midst of the unfolding corporate drama at Vista Outdoor, Inc. (NYSE:VSTO), real-time metrics from InvestingPro reveal a mixed financial landscape for the company. With a market capitalization of $2.21 billion, Vista Outdoor is currently trading near its 52-week high, at 97.35% of that peak. This aligns with the Gates Capital Management's perspective, as the firm's assessment of MNC's $42 per share offer suggests a robust valuation for Vista's remaining business post-Kinetic Group divestiture.
InvestingPro data indicates that Vista Outdoor's price-to-earnings (P/E) ratio stands at an adjusted -399.16 for the last twelve months as of Q4 2024, which may raise eyebrows among investors. However, it's worth noting that the adjusted P/E ratio is forecasted to improve significantly to 11.44, suggesting a potential turnaround in profitability. This outlook is bolstered by two InvestingPro Tips: analysts are expecting net income growth this year and have revised earnings upwards for the upcoming period. Furthermore, Vista Outdoor's liquid assets surpass its short-term obligations, providing some financial stability amidst the uncertainty of the proposed sales and mergers.
For investors seeking to delve deeper into Vista Outdoor's financial health and future prospects, there are additional InvestingPro Tips available that may shed light on the company’s potential. By using the coupon code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, gaining access to comprehensive analysis and insights. With 9 more InvestingPro Tips listed on the platform, informed decision-making is within reach for those navigating the complexities of Vista's current situation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.