It’s an exciting time for Camp Chef’s parent company, Vista Outdoor. They had originally planned to split their brands into two public companies this fall, then they announced a plan to sell their Sporting Products division next year to the Czechoslovak Group. They may have another curve ball to deal with because they received an unsolicited offer for the company from Colt CZ.
The proposal would mean that Vista Outdoor wouldn’t split, and instead would merge with Colt CZ. The proposal was for $30 per share, which is at a premium of where Vista Outdoor (NYSE: VSTO) has been trading, but under their September high.
It is apparent to Colt CZ that, with the separation of the Sporting Products segment, the remaining Outdoor Products segment will be subscale as a standalone public company with substantial risks. Once the cash generative Sporting Products segment, with attractive EBITDA margins of over 30%, is separated, shareholders will be left with a business that currently has EBITDA margins of less than 8%. The Outdoor Products business will be overcapitalized and placed to continue its growth through acquisitions; however, based on history, your shareholders consider this strategy a substantial risk rather than an opportunity.Colt CZ via Letter to Vista Outdoor’s Board
Colt CZ is a Czechoslovakian company that owns various gun and shooting brands. They purchased the storied Colt brand 2021, which is where the company gets its name.
It will be interesting to see how Vista Outdoor responds to the offer. We’re obviously biased towards putting Camp Chef in the best possible place after any transaction, but on the surface it doesn’t feel like a good home for them.
Right now within Vista their Sporting Products and Outdoor Products brands are relatively equally distributed in terms of revenue. Being purchased by Colt CZ would no doubt heavily tip the scales towards Sporting Products.
We would worry that a Czechoslovakian arms maker wouldn’t give Camp Chef the attention it needs to continue building what differentiates the brands. There also is the liability that a gun maker now owns Camp Chef again.
The Outdoor Products companies had trouble in 2018 when there were rumblings of a boycott because of their affiliation with a company that had a gun brand, which led to being dropped by some retailers. Vista Outdoor ended-up divesting their gun brand, and retailers like REI started carrying them again. It feels like a risk to be owned by a company that owns multiple gun brands.
We’ll see in the coming weeks how Vista Outdoor ultimately responds to the offer.