GAMCO Sends Letter to Vista Outdoor Inc.

Rhea-AI Summary

GAMCO Asset Management Inc., an affiliate of GAMCO Investors, Inc. (OTCQX: GAMI), has announced its intention to vote against the proposed acquisition of The Kinetic Group by the Czechoslovak Group (CSG) at Vista Outdoor Inc.'s (NYSE: VSTO) special meeting on July 30, 2024. GAMCO, which owns approximately 1.05% of Vista Outdoor's outstanding common stock, views MNC Capital's $42 per share all-cash offer as superior.

GAMCO's Proxy Voting Committee (PVC) cites concerns about execution risk in the planned turnaround of stand-alone Revelyst and the lack of CEO experience in leading a public company. The PVC also questions the valuation disconnect between investors and the board, potentially stemming from Vista's history of missing financial targets and overpaying for outdoor acquisitions.

Positive

• MNC Capital's $42 per share all-cash offer provides fair certainty values for both Vista Outdoor businesses
• GAMCO's stance may pressure the board to reconsider the current deal and potentially engage with MNC Capital for a better offer

Negative

• GAMCO's opposition to the Kinetic Group sale may create uncertainty for the proposed transaction
• Concerns raised about execution risk in Revelyst's turnaround plan
• Potential value destruction due to Vista's history of missing financial targets and overpaying for acquisitions
• Lack of CEO experience in leading a public company for the planned standalone Revelyst business

Insights

Financial Analyst

As a financial analyst, I find GAMCO's letter to Vista Outdoor Inc. highly significant. The 1.05% stake held by GAMCO and its affiliates gives weight to their opposition to the proposed sale of The Kinetic Group to CSG. Their intention to vote against this acquisition at the upcoming special meeting on July 30, 2024, could potentially influence other shareholders.

The crux of GAMCO's argument lies in their preference for MNC Capital's $42 per share all-cash offer, which they deem superior. This stance highlights a valuation disconnect between the board and investors. GAMCO's concerns about the execution risk associated with the stand-alone Revelyst entity, particularly under a CEO lacking public company leadership experience, are valid points that warrant investor attention.

Furthermore, GAMCO's skepticism towards management's ambitious financial targets for Revelyst, coupled with Vista's history of missing financial targets and overpaying for acquisitions, raises red flags about the company's strategic decision-making. This could potentially impact investor confidence in the long term.

The letter serves as a reminder of the importance of shareholder activism in corporate governance. It may prompt other institutional investors to reassess their positions, potentially leading to a broader pushback against the board's current strategy. This situation underscores the need for companies to align their strategic decisions with shareholder interests to maintain investor confidence and support.

Corporate Governance Expert

From a corporate governance perspective, GAMCO's letter to Vista Outdoor Inc. raises several critical issues. The opposition to the proposed sale of The Kinetic Group to CSG by a significant shareholder like GAMCO (1.05% stake) highlights potential gaps in the board's decision-making process and communication with shareholders.

The board's rejection of MNC Capital's $42 per share all-cash offer in favor of the CSG deal suggests a possible misalignment between the board's strategic vision and shareholder interests. This discrepancy could indicate governance concerns, particularly regarding the board's ability to maximize shareholder value.

Moreover, GAMCO's concerns about the execution risk associated with the stand-alone Revelyst entity, especially under a CEO lacking public company leadership experience, point to potential weaknesses in succession planning and risk management at the board level. The letter also implies a lack of transparency regarding the risks involved in the financial targets set for Revelyst.

The reference to Vista's history of missing financial targets and overpaying for acquisitions further suggests ongoing issues with the board's oversight of financial performance and M&A strategy. This track record of "significant value destruction" raises questions about the effectiveness of the board's risk assessment and decision-making processes.

In light of these concerns, the board may need to reassess its communication strategy with shareholders and consider more transparent disclosure of its strategic rationale. Failure to address these governance issues could lead to increased shareholder activism and potential reputational damage for the company.

GREENWICH, Conn.--(BUSINESS WIRE)-- GAMCO Asset Management Inc. (“GAMCO”), an affiliate of GAMCO Investors, Inc. (OTCQX: GAMI), and certain other affiliates own, on behalf of their clients, approximately 1.05% of the outstanding common stock of Vista Outdoor Inc. (NYSE: VSTO) (the “Company”). On July 26, 2024, GAMCO sent a letter to the Company’s Chairman of the Board. A copy of the letter is referenced herein.

Mr. Michael Callahan
Chairman of the Board
Vista Outdoor, Inc.

Dear Michael:

GAMCO Asset Management Inc. (“GAMCO”), on behalf of its clients, and certain of its affiliates owns approximately 613,207 shares of Vista Outdoor representing approximately 1.05% of Vista’s common stock outstanding.

We are writing to let you know that GAMCO’s Proxy Voting Committee (“PVC”) intends to vote “Against” the pending acquisition of The Kinetic Group by the Czechoslovak Group (CSG). The PVC views MNC Capital’s fully financed $42 per share all-cash offer as superior to the proposed sale of The Kinetic Group to CSG. We encourage the board to reconsider its position and engage with MNC Capital.

In short, amongst the issues the PVC considered were that the sale of The Kinetic Group to CSG leaves shareholders open to significant execution risk with respect to management’s planned turnaround of stand-alone Revelyst. We believe shareholders have not been fully informed about the potential extent of execution risk involved in the financial targets laid out for Revelyst, especially since the company will be led by a CEO with no previous experience as the CEO of a public company.

Furthermore, we believe that the $42 offer from MNC Capital offers fair certainty values for both businesses of Vista Outdoor and hold the view that if investors believed management’s ambitious Revelyst story, there would be a much higher public valuation of Revelyst (true valuations can be seen after each rejection of MNC all-cash bids). The valuation disconnect between investors and the board (along with its advisors) may stem from Vista’s history of missing financial targets and overpaying on outdoor acquisitions, which has led to significant value destruction.

GAMCO will vote “Against” the sale of The Kinetic Group to CSG at the July 30, 2024 special meeting of stockholders.

Sincerely,

/s/ Robert Leininger

Robert Leininger, CFA
Chairman of Proxy Voting Committee
GAMCO Asset Management Inc.

GAMCO Investors, Inc., through its subsidiaries, manages assets of private advisory accounts (GAMCO), mutual funds and closed-end funds (Gabelli Funds, LLC) and is known for its Private Market Value with a Catalyst™ style of investment.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240729042529/en/

Robert Leininger

Chair, Proxy Voting Committee

(914) 921-7754



For further information please visit

www.gabelli.com

Source: GAMCO Asset Management Inc.

FAQ

What is GAMCO's stance on Vista Outdoor's proposed sale of The Kinetic Group?

GAMCO Asset Management Inc. intends to vote against the proposed sale of The Kinetic Group to the Czechoslovak Group (CSG) at Vista Outdoor Inc.'s (NYSE: VSTO) special meeting on July 30, 2024.

How much of Vista Outdoor's stock does GAMCO own?

GAMCO Asset Management Inc. and certain affiliates own approximately 1.05% of Vista Outdoor Inc.'s (NYSE: VSTO) outstanding common stock, representing about 613,207 shares.

What alternative offer does GAMCO prefer for Vista Outdoor?

GAMCO prefers MNC Capital's fully financed $42 per share all-cash offer, which it views as superior to the proposed sale of The Kinetic Group to CSG.

What are GAMCO's main concerns about the proposed Vista Outdoor deal?

GAMCO is concerned about execution risk in Revelyst's turnaround, lack of CEO experience in leading a public company, and potential value destruction due to Vista's history of missing financial targets and overpaying for acquisitions.