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Sturm, Ruger & Co. Inc. Message Board

  • llllorac llllorac Nov 11, 2013 7:28 PM Flag

    RGR could buy SWHC cheap...

    A RGR buyout of SWHC with RGR stock would be a 10x ring shot....RGR's management team and shareholder "attentiveness" has awarded the stock with a better than expected valuation. SWHC, on the other hand , ( with the exception of CEO Debney ) seems to have the opposite affliction. This disparity however presents an interesting opportunity. SWHC shareholders would jump at the opportunity to swap 4 of their shares for a single RGR share and the deal would still be accretive to RGRs earnings, several unnamed SWHC board of directors would be put out to pasture and the sum of the parts would be more profitable than the two companies were operating as separate entities. The question raised during RGR's conference call by a new analyst tells me this dog can hunt. CEO Fifer was "delighted" with the idea, to use his word. The one obstacle could be several entrenched SWHC board members who have been using SWHC as a private "piggy bank" for there stock option scheme. Thankfully the number of shares they hold is a drop in the bucket when matched up against some institutional holders the largest of whom is vanguard. I would recommend that current Vanguard portfolio managers take heed to their founder Mr Bogle's credo of doing what's in the best interest of their clients and build a fire under SWHC management to initiate talks with RGRS board. It would benefit everyone including the gun buying community. Think of what great products would result from the best of RGRs and SWHCs think tanks putting their minds together.

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    • SWHC comes with baggage. Government / police contracts are a bad business. RGR is the Apple of the gun industry. They dont need an anchor attached to them. They need mossberg or a shotgun company to complete the masterpiece.

      • 1 Reply to langdonsmith
      • Police business is breakeven, but it does help to build image and brand. Military is more profitable. Be careful with the shotguns. There is no margin in low end items, like the 870 or the Mossberg line. That is why Ruger is re entering with the high end.

        Rifles are changing. I think the future hunting rifle will be more along the lines of an AR-10 than a Bar Safari. So Remington is going the way of the musket, the ranch rifle will decline - its time for the next generation. It will be a fun one with hunting rifles taking on a whole new set of responsibilities and capabilities.

    • You think Michael Fifer, an expert in math, would want to trade 1/4 share of RGR, worth $18.3, for each share of SWHC @ $11.3 market price? Rather unlikely. What about the anti-trust folks at the Justice Department? I'm sure they would hate to see a combination of firearms manufacturers. It would be different if the two corporations were in a different business, maybe electric batteries, or solar panels....

      • 1 Reply to puzzled48
      • Do you really believe the DOJ who recently approved two major airlines to merge in an industry that is an oligopoly is going to object to a merger in an industry that has more players than Carter has little liver pills? If you really believe that, then I'll assume you're sucking on the same glass pipe as Toronto's mayor. (Joke intended)... Whatever ratio Fifer would offer would have to be enticing for S&W shareholders to approve. 4 to 1 would still be accretive to RGR's earnings so it is really not as unrealistic as you might think. Fifer knows Smiths board would likely be against the buyout unless it was "sweet". It's not like SWHC is desperate for a partner. When the analyst asked Fifer the specific question " would you be interested in acquiring SWHC", it would have been totally reasonable for Fifer to respond by simply stating "we don't comment on such issues" and the matter wouldn't have raised an eyebrow. His willingness to volunteer the affirmative is telling IMHO....I'm convinced it wasn't just an "off the cuff" remark. I believe this topic has been discussed behind closed doors at RGR at length.

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