Massive Vista takeover hotting up
Whilst we’ve all been moaning about the weather and the quality of our political choices this summer, over the pond the Vista/CSG merger has been anything but dull. When I last wrote CSG had offered $1.91bn for Kinetic (Ammo brands) and the Vista board seemed happy with this and had told rival bidder, MNC capital, to ‘do one’.
In the period from March until the present MNC has however remained in hot pursuit. Bear in mind that it is bidding for the whole of the group, its bid has gone from a share unit offer price of $35 (25/03) to $37.50 (22/04) and then $39.50 (10/06). It currently stands at $42.00 which was tabled on 2 July. Back in February the Vista share price was $28 per share and at the time of writing in August it is just below $40. Over the same period CSG has increased its offer for Kenetic from $1.96bn on (28/05) to $2bn (24/06) and most recently $2.15bn on 22/07.
In the meantime, the obstacles to any sales seem to have been cleared. On 22 March Revelyst (non ammo Vista brands) got separate ‘public company’ listing. This is helpful as it allows Kinetic to be sold separately to CSG. On 25 June the Committee on Foreign Investment in the United States (CIFUS) approved CSG for ownership of Kinetic, in spite of objections from significant names such as Mike Pompeo and J D Vance.
The Vista board clearly favours the CSG bid and constantly refers to the MNC bid as ‘unsolicited’ and their press releases indicate they have an agreed break fee of $47.75m with CSG if the deal fails. According to the article in the FT on 6 June it has heard that MNC Capital ‘is leading an investor group that includes banks, private equity groups as well as other family offices. It plans to fund the deal with about $1.5bn of equity, including roughly $1bn from the family offices and the remainder with private credit and bank financing’. The MD of MNC Capital is Mark Gottfredson, a former Vista Board member.
I’m no financial analyst but allow me to make a few observations. First, I wish I had shares in Vista, they are clear winners in the bidding war. Given that the board seemed happy with the $1.91 bid from CSG, MNC has cost CSG an extra $240m on the purchase price. MNC keeps coming back and has increased its original offer by 20%, and seem pretty determined too. Both parties must see some real value, huge potential or scope for big cost savings in Vista. In historical terms capital is pretty expensive at the moment, high interest payments are always a massive burden on a P & L account and both parties seem to be borrowing massive amounts. Given that CSG are in the ammunition business I guess a big presence in the huge US market makes sense and maybe they need the capacity. Vista has 3 main factories; Federal in Anoka, CCI in Lewiston and Remington in Arkansas. Maybe MNC see value in selling off one or more of them.
Next step is a ‘special’ board meeting on 13 September, surely there will be clarity then…….
Retail Therapy
You may be aware that I have been doing some work with William Evans recently. It’s always interesting to take a look at other businesses and discover that many of your assumptions about them are wrong. I was obviously involved with the Beretta Gallery since 2005 but it was never my direct responsibility. Apart from a few suppliers The Gallery was only able to buy from Beretta Group companies, William Evans is not constrained in this way. Both the St James’s and Bisley stores are in great locations and I have quickly come to realise how shops develop loyal customers who ‘adopt’ retailers as their go-to source of shooting gear. Everyone moans about the margin on shotgun cartridges, but they do keep customers coming in and are good for cash flow. Dealing with second-hand guns is something that most shops do well with but it’s not my area of expertise. The trade is not exactly booming out there, but my hope, and feeling from the press, is that the UK has turned a corner economically and things should hopefully start to improve over the autumn.
What’s in my ear?
I love podcasts, you can be getting on with other stuff while listening to them, and in the car they are often much better than the radio. I have recently discovered free content provided by Beyond the Hedge (Guns on Pegs owned) where some great articles are read by the authors. There is so much stuff I plan to read but never get time to, this is a great way to consume articles. I particularly enjoyed Ian Coghill’s piece on Rewilding and how the whole argument in favour of it is deeply flawed and very dangerous but suits the agenda of certain ideologically driven, anti-shooting groups.
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