TIG Advisors Sends Letter to Vista Outdoor Board Supporting MNC All-Cash Acquisition

Rhea-AI Summary

TIG Advisors, an investment advisor owning 532,000 shares of Vista Outdoor (NYSE: VSTO), has sent a letter to Vista's Board of Directors advocating for MNC Capital's all-cash acquisition offer of $42 per share. TIG believes this proposal is superior to the pending acquisition of The Kinetic Group by Czechoslovak Group (CSG). The letter criticizes the Board's hesitance, citing MNC's provision of financing and a merger agreement as proof of its commitment. TIG argues that Vista's current transformation plan is riskier and less certain than the immediate value provided by MNC's offer. TIG urges the Board to re-engage with MNC if the pending CSG deal is rejected by shareholders.

The letter also highlights that the market values Vista at $36.41 per share, suggesting the MNC offer includes a premium. TIG emphasizes the need for the Board to act in shareholders' best interests by securing the MNC deal.

Positive

• MNC Capital's offer of $42 per share provides immediate and certain value.
• MNC has secured financing and a merger agreement, showing strong commitment.
• Market perceives MNC's offer as providing a premium over current trading value.

Negative

• Board's reluctance to re-engage with MNC may lead to shareholder dissatisfaction.
• Vista's current transformation plan exposes shareholders to significant execution risk.

Insights

Financial Analyst

The $42 per share all-cash offer from MNC Capital presents a significant premium over Vista Outdoor's current share price of $36.41. This implies an immediate and secure return for shareholders, which is a compelling proposal, particularly when considering the execution risk associated with the pending acquisition of The Kinetic Group by Czechoslovak Group a.s. (CSG).

From a financial standpoint, the certainty of cash is often preferred by shareholders, especially in volatile markets. The cash offer mitigates the uncertainty of future performance metrics and speculative valuations tied to strategic plans, such as Vista's GEAR Up transformation plan, which seems to have a longer horizon and significant implementation risks. Given these factors, the MNC offer stands as an attractive option.

Moreover, the letter mentions that even if the Board's estimations double EBITDA in FY2025 and achieve a 10.0x EV/EBITDA multiple, it still barely meets the valuation provided by MNC. This highlights a crucial discrepancy in valuation perspectives and risks assumed by the Board versus the more certain immediate cash payout from MNC.

For retail investors, accepting the MNC offer could mean locking in a guaranteed return now, which is often more favorable compared to betting on unproven future growth projections.

Corporate Governance Expert

The letter from TIG Advisors emphasizes shareholder engagement and fiduciary duty. Boards are expected to act in the best interest of shareholders, which includes thoroughly evaluating offers that maximize shareholder value and minimize risk. The clear preference shown by TIG for the MNC offer suggests that the Board's strategy may not be aligned with shareholder interests if they proceed with CSG's acquisition.

The mention of potentially refusing to reengage with MNC implies a governance issue, as it could be seen as neglecting a favorable option that has clear backing from significant investors. This could lead to questions about the Board's transparency and decision-making processes. Shareholders expect the Board to provide timely, complete information to make informed decisions and any appearance of disregarding shareholder preferences can erode trust.

For retail investors, this raises the importance of considering the governance practices of the companies they invest in, as misalignment between the Board and shareholder interests can impact the long-term value of their investments.

Believes MNC Capital Fully Financed $42 Cash Per Share Offer is Far Superior to the Pending Acquisition of The Kinetic Group by Czechoslovak Group

Intends to Vote Against the Pending Acquisition of The Kinetic Group by Czechoslovak Group

NEW YORK--(BUSINESS WIRE)-- TIG Advisors, LLC, an investment adviser which owns approximately 532,000 shares of Vista Outdoor Inc. (NYSE: VSTO) (“Vista” or the “Company”) today sent a letter to the Vista Board of Directors regarding its support of MNC Capital, L.P.’s proposed all-cash offer to acquire the Company for $42 per share and its intention to vote against the pending sale of The Kinetic Group to Czechoslovak Group a.s. ("CSG").

The full text of the letter follows.

July 12, 2024

The Board of Directors
Vista Outdoor Inc.
1 Vista Way
Anoka, MN 55303

Dear Members of the Board,

TIG Advisors, LLC and its affiliates collectively own approximately 532,000 shares of Vista Outdoor Inc. (“Vista” or the “Company”). We are writing to the Board of Directors (the “Board”) to share our views on why Vista should pursue the recent proposal by MNC Capital, L.P. (“MNC”) to acquire the Company and why the transaction is far superior to the pending acquisition of The Kinetic Group by Czechoslovak Group a.s. (“CSG”).

The MNC offer presents both maximum certainty of value and less execution risk. MNC has made its commitment clear, compensating Vista shareholders with $42 per share in cash. MNC has delivered on Vista’s asks, including delivery of financing and a merger agreement, and yet the Board now decides to change the goal posts arguing that the transaction will take months to close. This is a spurious argument given that the Board’s own “GEAR Up” transformation plan requires years to achieve and exposes shareholders to significant execution risk. Further, the Company has relentlessly pressured the market to believe that the MNC offer significantly undervalues Revelyst based on an unproven turnaround story.

Vista shareholders should not have to fight for the Board to execute the superior MNC transaction. The Board has expressed concerns about the execution risk of the MNC offer. We urge the Board to negotiate appropriate protections. The Board, acting as fiduciaries to shareholders, should choose to execute the MNC transaction given it is in the best interests of all shareholders.

The market has spoken, implying at $36.41 per share (VSTO price as of close on 7/10 prior to ISS recommending the MNC bid) that the value of the Revelyst stub is, at best, $15.41 per share. Moreover, the $42 per share offer from MNC is likely keeping some premium in the stock. To match the value of the MNC bid implies a stub value of $21 per share. Thus, the stub would need to be worth $5.59 per share more, or a 36.3% premium to the current implied stub value. Meanwhile, the Company’s unrealistic potential trading values for Revelyst are based on aggressive assumptions that they can double EBITDA in FY2025 and trade at 10.0x EV/EBITDA, the high end of the Company’s advisors’ estimate potential EV/EBITDA trading range of 7.0x to 10.0x.

While the Board has done a good job at extracting value, we find it disturbing that the Board is now threatening shareholders, indicating that it will not reengage with MNC regardless of the outcome of the shareholder vote. Thus, forcing shareholders to either accept the CSG deal or nothing. We urge the Board to listen to shareholders and reconsider its stated position that it will not negotiate with MNC.

If the transaction with CSG is voted down, we believe it is a strong signal that shareholders prefer the immediate and certain value of the $42 per share MNC offer. We believe the MNC offer is a clear premium to the total value created from the combination of the transaction with CSG and the Revelyst stub. We see it now as a clear choice to vote against the CSG transaction and, in doing so, call upon the Board to engage with MNC.

Regards,

Drew Figdor
Portfolio Manager

Who is TIG Advisors?

TIG Advisors, LLC (“TIG”) is an SEC registered investment advisor that is a subsidiary of AlTi Global, Inc. based in New York City with approximately $2.1 billion in AUM, representing a diverse range of investment strategies primarily for institutional investors, including pension funds, life insurance companies and others. TIG, founded in 1980, has long held a goal of working constructively with management teams to help identify, surface, and capture value that may not be otherwise apparent to the marketplace.

TIG believes in three key governance principles as it relates to the conduct of the boards of the companies that we invest in:

• Accountability and Engagement – the board holds itself accountable to stockholders and maintains an active and responsive engagement process with its stockholders. Effective engagement includes actively soliciting stockholder views on significant matters that impact long-term stockholder value and being responsive to the expressed views of stockholders.

• Transparency – the board maintains a transparent strategic and decision-making process, open to scrutiny from stockholders. The board should provide timely and complete information to stockholders to allow them to evaluate board decisions and make informed voting and investment decisions.

• Independence and Alignment – board members are independent enough to diligently supervise management, ensuring that they act in the interests of stockholders. Boards should have effective, aligned and independent leadership that is focused on preserving and enhancing stockholder value on a time and risk-adjusted basis.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240712117004/en/

Gasthalter & Co.

Amanda Shpiner/Grace Cartwright

(212) 257-4170

Source: TIG Advisors, LLC

FAQ

What is the offer from MNC Capital for Vista Outdoor shares?

MNC Capital has proposed an all-cash acquisition offer of $42 per share for Vista Outdoor (VSTO).

Why does TIG Advisors prefer the MNC Capital offer over the CSG transaction?

TIG Advisors believes the MNC Capital offer provides immediate and certain value, with less execution risk compared to the pending acquisition of The Kinetic Group by Czechoslovak Group (CSG).

How many shares of Vista Outdoor does TIG Advisors own?

TIG Advisors owns approximately 532,000 shares of Vista Outdoor (VSTO).

What are the potential risks mentioned by TIG Advisors regarding Vista's current plan?

TIG Advisors highlights significant execution risk and an uncertain value outcome associated with Vista's current transformation plan.

What is the valuation of Vista Outdoor shares according to the market?

As of July 10, Vista Outdoor shares were valued at $36.41 each, implying a premium in MNC's $42 per share offer.