NEW YORK - Gates Capital Management, a significant shareholder of Vista Outdoor Inc . (NYSE:VSTO), has voiced opposition to the company's pending sale of The Kinetic Group to Czechoslovak Group a.s. ("CSG"). The asset management firm, holding approximately 9.6% of Vista's shares, has sent a letter to Vista's Board of Directors stating its intention to vote against the proposed transaction.
In its correspondence, Gates Capital Management criticized the sale price of $2.1 billion as undervaluing The Kinetic Group, which they noted has an average annual free cash flow of over $400 million. The firm also disapproved of the early retirement of $500 million in debt with a 4.5% coupon, a move they believe unfairly benefits bondholders at the expense of Vista shareholders.
The firm pointed to a recommendation by proxy adviser Institutional Shareholder Services (ISS) to vote against the sale, supporting Gates Capital's position. Furthermore, Gates Capital Management referenced an alternative bid from MNC Capital to purchase Vista at $42 per share, suggesting this could be a better starting point for negotiations compared to the CSG offer.
Gates Capital also expressed support for Vista's original plan to execute a tax-free spin-off, dividing The Kinetic Group and Revelyst into two separate public companies. This would align with Gates Capital's preference for a structure that could potentially enhance shareholder returns over time.
Vista Outdoor has not publicly responded to Gates Capital's letter. The opposition from a major shareholder adds a layer of complexity to the ongoing negotiations and could influence the outcome of the proposed sale.
This report is based on a press release statement from Gates Capital Management.
In other recent news, Vista Outdoor Inc. is in the financial spotlight with several significant developments. The company's Q4 total sales reached $2.75 billion, boasting adjusted EBITDA margins of 16.1%.
Lake Street Capital Markets has increased its price target for Vista Outdoor shares to $40.00, following a higher bid from CSG for Vista Outdoor's Kinetic business. The proposed acquisition deal, worth $2.1 billion, is expected to provide shareholders with a $21 per share cash payout and a share of Revelyst.
On another front, MNC Capital, L.P. has reaffirmed its commitment to a $42 per share all-cash offer to acquire Vista Outdoor, despite the company's ongoing sale to Czechoslovak Group a.s. ("CSG") for its Kinetic Group business. Investment advisor TIG Advisors, which holds about 532,000 shares of Vista Outdoor, has publicly expressed preference for MNC Capital's proposal.
Meanwhile, multiple analyst firms have updated their stance on Vista Outdoor. Roth/MKM and B.Riley maintained a Buy rating on the company's shares, while Lake Street Capital Markets downgraded the company from Buy to Hold. These are recent developments in the operations of Vista Outdoor Inc.
InvestingPro Insights
As Vista Outdoor Inc. (NYSE:VSTO) faces opposition from Gates Capital Management regarding its sale strategy, investors are closely monitoring the company's financial health and market performance. According to InvestingPro data, Vista Outdoor boasts a market capitalization of $2.23 billion, reflecting the scale of the business amidst industry challenges.
Despite recent controversies, the company has experienced a significant price uptick over the last six months, with a 34.19% return, trading near its 52-week high at 98.46% of the peak value. This robust market performance is underpinned by a strong return over the last three months, amounting to 19.83%.
On the earnings front, Vista's P/E ratio stands at -402.84, suggesting investor concerns about profitability in the short term. However, the adjusted P/E ratio for the last twelve months as of Q4 2024 is a more favorable 11.56, indicating potential for improved earnings.
The InvestingPro Tips highlight that while the company was not profitable over the last twelve months, analysts predict Vista will be profitable this year, and net income is expected to grow. Moreover, Vista Outdoor's liquid assets exceed short-term obligations, showcasing financial stability in terms of liquidity.
For investors seeking more in-depth analysis, InvestingPro offers additional tips that could shed light on Vista Outdoor's future performance and investment potential. There are 10 more InvestingPro Tips available, including insights on shareholder yield and the company's trading position relative to its 52-week high. These tips could be particularly valuable for shareholders like Gates Capital Management as they assess the company's strategic moves. Interested readers can access these tips and utilize the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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