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.
