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Vista Outdoor Acquired BRG Sports’ Division for $400 Million

Gabriel Kane

Yesterday’s Consumer Pops and Drops: VSTO, BWA, WWAV, and TSLA

(Continued from Prior Part)

Price movement 

Vista Outdoor (VSTO) has a market cap of $3.0 billion. It fell by 6.7% and closed at $49.16 per share on April 4, 2016. The price movements on a weekly, monthly, and YTD (year-to-date) basis were -4.0%, -4.4%, and 10.5%, respectively.

Currently, Vista Outdoor is trading 4.9% below its 20-day moving average, 0.48% above its 50-day moving average, and 7.0% above its 200-day moving average.

The Guggenheim Spin-Off ETF (CSD) invests 4.6% of its holdings in Vista Outdoor. CSD tracks an index of US-listed stocks spun off from corporate parents over the past 30 months. The index holds companies of all sizes. CSD’s YTD price movement was 1.9% as of April 1, 2016.

The iShares Morningstar Small Core ETF (JKJ) invests 0.55% of its holdings in Vista Outdoor. JKJ tracks a market-cap-weighted index of US small-cap core stocks. The index selects stocks from a 90%–97% market cap that fall into Morningstar’s core style categorization.

The market caps of Vista Outdoor’s competitors are as follows:

  • Sturm, Ruger & Co. (RGR) – $1.2 billion
  • Smith & Wesson Holding (SWHC) – $1.3 billion
  • Orbital ATK (OA) – $5.1 billion

Vista Outdoor acquired BRG Sports’ division

In a press release on April 4, 2016, the company stated that “Vista Outdoor has completed the acquisition of BRG Sports’ Action Sports division, which was operated by Bell Sports Corporation. This acquisition includes Bell and Giro, and C-Preme and Blackburn brands.”

It also said that “Under the terms, Vista Outdoor paid $400 million with additional contingent consideration payable if incremental profitability growth milestones within the Bell Powersports product line are achieved. It also financed the acquisition through a combination of cash on hand, drawings on its revolving credit facility and increased Term Loan A borrowings of ~$300 million.”

The company will include the impact of this acquisition in its fiscal 2017 guidance.

Performance in fiscal 3Q16

Vista Outdoor reported fiscal 3Q16 net sales of $592.6 million—a rise of 16.9% compared to net sales of $506.9 million in fiscal 3Q15. Its net income and EPS (earnings per share) rose to $43.2 million and $0.70, respectively, in fiscal 3Q16—compared to -$11.2 million and -$0.17, respectively, in fiscal 3Q15.

Vista’s cash and cash equivalents fell by 73.1% and its inventories rose by 28.4% in fiscal 3Q16—compared to fiscal 4Q15. Its current ratio fell to 3.1x and its DE (debt-to-equity) ratio rose to 0.79x in fiscal 3Q16—compared to a current ratio and DE ratio of 3.5x and 0.56x, respectively, in fiscal 3Q15.

It has price-to-earnings and price-to-book value ratios of 24.6x and 1.8x, respectively, as of April 4, 2016.

Projections

The company made the following projections for fiscal 2016:

  • sales of $2.24 billion–$2.26 billion
  • adjusted EPS of $2.40–$2.50
  • capital expenditure of ~$45 million
  • free cash flow of $150 million–$170 million
  • tax rate of ~38%

In the next part, we’ll look at BorgWarner.

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