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The doors continue to open for Vista Outdoor (VSTO) as it has two potential routes to take surrounding M&A. Today, Czechoslovak Group, or CSG, increased its purchase price for VSTO's Kinetic Group business to $2.1 bln from $2.0 bln. The deal would leave VSTO as a leaner publicly-traded firm, paying shareholders $21.00 per share, a $3.00 bump from CSG's previous offer.

Meanwhile, last week, MNC Capital expressed final efforts to purchase VSTO outright in an all-cash transaction valued at $42.00 per share, a roughly 14% premium over Friday's closing price. MNC's increased offer was first announced on June 26 and represented an approximately 25% premium to VSTO's price at the time. It also represented an increase from MNC's earlier offer of $39.50 per share.

With two decent offers on the table, the question now is what route VSTO will choose.

• The Kinetic Group comprises just over half of VSTO's annual sales and consists primarily of ammunition brands. Unfortunately for VSTO, its largest segment has been its worst performer over the past several quarters, registering a 17.4% decline in sales yr/yr in FY24 (Mar).
• Still, VSTO's other segments have not been pulling their weight either. The company's Outdoor and Adventure segments, which comprise most of the remaining annual revs, slipped by 2.3% and 2.8% yr/yr, respectively, last year. As such, investors likely favor MNC's offer of a complete buyout as VSTO's other brands may not have much success on their own.
  • With MNC staying firm on its $42.00/share offer, shares are likely to be capped at that number over the immediate term. The offer is also an all-cash deal, keeping financing conditions off the table and paving the way for a smoother transaction. Furthermore, since MNC would be buying all of VSTO's assets and taking them private, there are likely fewer regulatory barriers to overcome relative to the CSG deal.
• However, VSTO has constantly rejected MNC's offers. Instead, the Board is leaning toward the merger with CSG, noting that MNC's final offer significantly undervalues VSTO and the CSG agreement delivers $7-16 more per share to investors than MNC's purchase price.

With uncertainty surrounding VSTO, it is better to employ a wait-and-see approach. VSTO is leaning toward a merger, which may not appeal to shareholders as much as MNC's offer, possibly resulting in profit taking.