Sends Letter to Vista Board of Directors
Outlining Why Tax-Free Spin-Off or Cash Offer for the Entire
Company Are Superior to the Proposed Sale of The Kinetic
Group
NEW
YORK, July 17, 2024 /PRNewswire/ -- Gates
Capital Management, Inc. ("Gates Capital Management" or "we"), an
event-driven alternative asset manager that beneficially owns
5,589,041 shares, or approximately 9.6%, of Vista Outdoor, Inc.
("Vista" or the "Company") (NYSE: VSTO), today sent a letter to the
Vista Board of Directors (the "Board") regarding its intention to
vote AGAINST the pending sale of The Kinetic Group to Czechoslovak
Group a.s. ("CSG").
July 17, 2024
Vista Outdoor Inc.
Attn: Board of Directors
1 Vista Way
Anoka, Minnesota 55303
Dear Members of the Board,
Gates Capital Management is one of the largest shareholders of
Vista, beneficially owning 5,589,041 shares, or approximately 9.6%,
of the Company. We are writing to the Board to express our
concerns regarding the pending sale of The Kinetic Group to CSG.
We strongly oppose the sale at the proposed price of
$2.1 billion and believe that Vista
shareholders deserve a higher price that accurately reflects The
Kinetic Group's financial strength and future potential. The
Kinetic Group consistently generates substantial free cash flow,
which averaged more than $400 million
annually over the four years ended March
2024 (free cash flow is Operating Income plus Depreciation
and Amortization, minus $20 million
of annual corporate expense and $25
million of annual capital expenditures). We believe
the proposed sale price does not fairly value this cash-generative
asset. Additionally, the current proposal retires
$500 million of inexpensive 4.5%
coupon debt well ahead of its 2029 maturity. This early debt
retirement transfers more than $1.50
per share of value from Vista shareholders to bondholders, which we
find unacceptable. In the event of a higher bid by CSG, we
believe Vista's plan to keep $250
million of cash at Revelyst after the sale is not in the
best interest of Vista shareholders and the amount should be
reduced to $50 million with the
additional $200 million being
returned to Company shareholders.
Given the inadequacy of the proposed CSG transaction, we were
not surprised to see that proxy adviser Institutional Shareholder
Services (ISS) recently recommended voting "AGAINST" the
transaction.
Separately, we believe that the $42 per share bid from MNC Capital ("MNC") to
acquire all of Vista provides a reasonable starting point for Vista
to negotiate a superior transaction versus the current CSG
proposal. Both the CSG transaction and MNC proposal are fully
taxable, but only the MNC proposal would deliver the certainty of
an all-cash payment at closing.
Finally, we would support Vista's original plan of a tax-free
spin-off, separating The Kinetic Group and Revelyst into two
standalone public companies. This plan could include
$50 million of cash allocated to
Revelyst and a commitment from The Kinetic Group to pay out at
least 75% of its free cash flow in dividends and share repurchases
annually. We believe this decision would provide an excellent
opportunity for both businesses to deliver strong shareholder
returns over time.
We urge the Board to reconsider its currently proposed
transaction and to act in the best interests of all shareholders by
either securing a materially higher price for the Kinetic Group,
engaging with MNC to sell the entire Company, or reverting to
Vista's original spin-off plan.
Sincerely,
Jeff Gates
Managing Partner
Gates Capital Management
About Gates Capital Management
Gates Capital
Management is an event-driven alternative asset manager for
institutional and private clients globally. Gates Capital was
founded in 1996 and today has more than $2
billion in assets under management. Further
information is available at www.gatescap.com.
Cautionary Statement Regarding Forward-Looking
Statements
This press release does not constitute an offer to sell or
solicitation of an offer to buy any of the securities described
herein in any state to any person. The information herein contains
"forward-looking statements". Specific forward-looking statements
can be identified by the fact that they do not relate strictly to
historical or current facts and include, without limitation, words
such as "may," "will," "expects," "believes," "anticipates,"
"plans," "estimates," "projects," "potential," "targets,"
"forecasts," "seeks," "could," "should" or the negative of such
terms or other variations on such terms or comparable terminology.
Similarly, statements that describe our objectives, plans or goals
are forward-looking. Forward-looking statements are subject to
various risks and uncertainties and assumptions. There can be no
assurance that any idea or assumption herein is, or will be proven,
correct or that any of the objectives, plans or goals stated herein
will ultimately be undertaken or achieved. If one or more of such
risks or uncertainties materialize, or if Gates Capital Management,
Inc's ("Gates") underlying assumptions prove to be incorrect, the
actual results may vary materially from outcomes indicated by these
statements. Accordingly, forward-looking statements should not be
regarded as a representation by Gates that the future plans,
estimates or expectations contemplated will ever be achieved.
Media Contacts:
ASC Advisors
Taylor Ingraham / Morgan
Davis
tingraham@ascadvisors.com / mdavis@ascadvisors.com
203-992-1230
Investor Contact:
Paul Lucas
Managing Director
plucas@gatescap.com
212-626-0290
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SOURCE Gates Capital Management