Vista Outdoor (VSTO) to Sell its Sporting Products Business
Vista Outdoor Inc. VSTO signs a definitive agreement with Czechoslovak Group a.s. ("CSG") to sell its Sporting Products business. This transaction is valued at $1.91 billion, all in cash, subject to customary closing conditions.
The strategic move aligns with its plan to split the company into distinct entities, as announced on May 5, 2022. The company remains optimistic in this regard and expects this approach to maximize value for shareholders and position its Sporting Products and Outdoor Products for future success.
CSG, a leading industrial technology company, operates in strategic sectors like defense and aerospace. VSTO believes CSG is the ideal home for its ammunition brands, with a commitment to American legacy and manufacturing, supporting military and law enforcement, and investing in conservation and shooting heritage.
Transaction in Details
The Sporting Products business of VSTO is valued at $1.91 billion in an all-cash transaction, supported by $1.11 billion in committed debt financing. CSG will fund the remaining amount. The valuation is approximately 5x enterprise value of Sporting Products FY24 EBITDA, including estimated standalone costs.
To execute the deal, VSTO will separate its Outdoor Products business from its Sporting Products business. CSG will merge one of its subsidiaries with Vista Outdoor (holding only the Sporting Products business). Public stockholders of VSTO will receive shares of Outdoor Products and around $750 million in cash. The transaction is set to close in 2024, subject to stockholder and regulatory approvals.
Outdoor Products
Following the transaction, VSTO's Outdoor Products business will rebrand as Revelyst, Inc. ("GEAR") and trade on the New York Stock Exchange. Revelyst will capitalize on its diverse portfolio, including brands like Fox, Bell, Giro and CamelBak. Eric Nyman, the current CEO of Outdoor Products, will lead Revelyst after the transaction.
The company provided a preview of its earnings results for second-quarter fiscal 2024. Sales are expected to be between $325-$330 million, suggesting a decline from the year-ago figures. A decrease in purchasing across all units occurred due to cautious channel partners and consumer pressure from high-interest rates, leading to a decline. This was partially offset by inorganic sales contributions.
Operating income is expected to range between $11-$15 million due to promotional pricing and lower sales driven by inventory clearance.
FY2024 Guidance Updated
Share of Vista Outdoor have declined 13.6% in the past three months compared with the Zacks Leisure and Recreation Products industry’s 26.2% fall. The company has lowered its full-year FY24 guidance due to challenging economic conditions, higher interest rates, and other short-term factors.
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The company now expects sales to be in the range of $2.725-$2.825 billion, down from the prior estimate of $2.85-$2.95 billion. The adjusted EBITDA margin is projected in the range of 15.50-16.25%, down from the prior estimate of 17.75-18.75%.
Outdoor Products sales are expected to be in the range of $1.275- $1.325 billion, down from the prior estimate of $1.375-$1.425 billion. The segment’s EBITDA Margin is expected to be in the range of 7.75-8.25%, down from the prior estimate of 12-13%.
Adjusted earnings per share (EPS) is expected to be between $3.65-$4.05, down from the prior estimate of $4.50-$5.00 per share.
The effective tax rate of approximately 19.5% is down from the prior estimate of 23.5%.
Interest expense is expected to be in the range of $55-$65 million, down from the prior estimate of $75 million.
Zacks Rank & Key Picks
Vista Outdoor currently carries a Zacks Rank #3 (Hold).
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