After boardroom drama and international intrigue, Anoka's Federal Ammunition close to being sold

When companies announce a deal, what follows is usually an orderly process and an anticlimactic deal closing. Vista Outdoor's attempt to sell its ammunition companies — including the century-old Federal operation in Anoka — was anything but.

Since Vista announced the deal a year ago, it has faced international intrigue, boardroom and C-suite drama, opposition from conservative media and politicians, outspoken shareholders, widely diverging valuations on each segment, a surprising late-stage proposal and eight adjournments of a shareholder vote to approve the primary deal.

Now, after a year of the company fighting for its vision of what its brands could be, the pressure to change course could be over. Shareholders are set to vote on the latest plan on Nov. 25., one that would sell the company's ammunition division to Prague-based Czechoslovak Group (CSG) and the outdoor products brands to late bidder Strategic Value Partners for a combined $3.35 billion. That would return more to shareholders than was imagined a year ago.

But if the past year has taught shareholders anything, it's that the deal is not done until they vote on it.

"We are encouraged by the change in structure and think this will likely be the final structure after a year of negotiations and changes," wrote Mark Smith, an analyst with Lake Street Capital Markets, in a recent shareholder report. "We think there are still things that need to be worked out to finalize this deal, but we see a clear path to completion."

Vista built by bundling brands

Vista formed in 2015, spun off from Alliant Techsystems as it sold its defense and satellite businesses, with Federal Ammunition as its main asset. It landed its headquarters at the Federal campus in Anoka and pursued a strategy of consolidating outdoors brands, believing that bundled backroom operations and marketing costs would allow profits to increase more quickly than if those brands were on their own.

Federal has been making ammunition in Anoka for more than 100 years, and is arguably still the centerpiece among Vista's brands. About 1,500 of Vista's 6,400 employees work for Federal, including a number of multi-generational family members working in Anoka.

But the company now includes 40 different brands from Remington, CCI and Speer ammunition to Bell and Giro bicycle accessories, CamelBak water bottles, Camp Chef, Simms Fishing and Bushnell and Foresight Golf. A dozen are power brands that each generate more than $100 million in annual revenue.

Over the years, though, company officials found that the ammunition market followed different norms than other outdoor activity sectors. They came to the conclusion in May 2022 that Vista should split into two public companies. One would house the ammunition business, later renamed the Kinetic Group, the other outdoor brands renamed Revelyst Inc.

A split, they said, would unlock shareholder value. Not only do the divisions have different revenue cycles, other factors also favored a break-up, including the fact that some institutional investors view firearms and ammunition companies as sin stocks and avoid them.

"Ultimately, I agree with the thesis of splitting the companies up," said Anna Glaessgen, an analyst with B. Riley Securities who follows Vista. "Firearms and ammunition [companies] have pretty intense demand cycles that are detached from a typical consumer products company, largely around fears about Second Amendment reform."

Boardroom and C-suite changes complicate plan

Almost immediately, Vista's board hired the Wall Street investment bank Morgan Stanley as the plan changed to sell the ammunitions brands.

The shift in direction led to drama in the board room, followed by an unexpected shake-up in the C-suite.

In July 2022, Mark Gottfredson, a Vista director since 2015, informed the other board members he planned to make a bid for the ammunition business and recused himself from further discussions regarding the sale, according to Securities and Exchange Commission filings. He formed a group of U.S. based investors, MNC Capital, that included institutional investors and private family offices.

Gottfredson, increasingly making an argument that the ammunitions brands should be owned by U.S.-based investors, would eventually resign from the board in 2024. MNC Capital then reconstituted its offer and made a bid for all of Vista Outdoor, not just the ammunition group.

In the meantime, the company was readying for the split and continuing to do business. Then came another kink in the plan: Chris Metz, hired to head Vista after successfully leading Arctic Cat, abruptly resigned in February 2023. Few details were released. Metz landed as CEO of Solo Stove in January 2024.

Executives heading the two groups — Kinetic's Jason Vanderbrink and Revelyst's Eric Nyman — became co-CEOs of Vista. And board chair Michael Callahan, who heads outdoors products consultancy Aspen Partners, became much more involved in the acquisition talks.

Picking Czechoslovak Group

Morgan Stanley had identified more than two dozen bidders for the Kinetic Group, according to SEC filings.

Eventually, the list was winnowed to three: Gottfredson's MNC Capital group, which had not acquired or operated any other company; and two companies from the Czech Republic — Colt CZ, a firearms and ammunition manufacturer, and CSG, which owns more than 100 businesses in the transportation, defense and security industries and several makers of small-caliber ammunition.

A year ago, Vista announced CSG would be the new owner of the Kinetic Group under a deal worth $1.91 billion.

The plan for Revelyst to be a standalone public company continued. The deal was expected to withstand regulatory approvals and close in 2024.

But then several more unexpected hurdles appeared, with Gottfredson in the middle of them.

MNC Capital switches gear

Several days after CSG won the bidding for the Kinetic Group, Gottfredson informed the board he would resume his full participation on the board of Vista Outdoor. Then Gottfredson resigned in January, and less than a month later, MNC Capital had reformed and made a $2.9 billion bid for all of Vista, not just the ammunition business, changing the game again.

In the meantime, Gottfredson also became more vocal about his belief that U.S.-based investors should own the ammunition brands.

"The transaction would allow the sporting products business and its critical national security assets to remain under U.S. ownership," Gottfredson wrote in a letter to the Vista board regarding the group's revised bid for all of Vista Outdoor.

Vista's board reviewed and rejected MNC's bid.

The story was picked up by the conservative media.

Politicians — including Republican vice presidential nominee JD Vance, in his capacity as a senator from Ohio — focused on a panel that needed to clear the deal since CSG was based in another country. They wrote letters to Janet Yellen, who in her role as treasury secretary heads the Committee on Foreign Investment in the United States (CFIUS).

CFIUS weighs whether deals might harm national security and has the power to stop or modify those deals. CSG had passed CFIUS muster for other deals. It is a supplier for the U.S. military and partners with U.S. defense contractors such as General Dynamics and Raytheon.

Letters by Vance, and Sen. John Kennedy and Rep. Clay Higgins of Louisiana, referenced possible ties to China and Russia. The mounting criticism also included the National Sheriffs' Association and the National Association of Police Organizations, worried about supply problems under a foreign-owned company.

The campaign prompted public comments by both Vista's Vanderbrink and CSG Chief Executive Michal Strnad.

Strnad said the impression given by the letters was "profoundly mistaken."

"CSG is one of the most important private supporters of the Ukrainian military effort, a country to which we have supplied much-needed weapon systems dating back to 2018, well before the outbreak of open Russian aggression," Strnad said in his own letter.

Vanderbrink took to YouTube — rare for a big public corporation — to assure customers.

"We have always and will continue to proudly prioritize ammo orders and shipments for our U.S. military and local, state and federal law enforcement agencies," Vanderbrink said in the video. He also assured viewers that CCI, Federal, Hevi-Shot, Remington and Speer ammunition would remain American-made.

Eventually, CFIUS approved the CSG-Vista deal in June.

"We believe the end result supports our view that CSG — which has deep expertise in supply chain excellence and ammunition manufacturing and strong support for NATO and allied nations — will be an excellent owner of the Kinetic Group," said Callahan, Vista's board chair, in a statement. "CSG is fully committed to supporting our American workforce, American hunters and domestic and allied military and law enforcement partners."

Attention sweetens offers

However, MNC did not give up.

A day after CSG gained CFIUS clearance, MNC Capital raised its bid for all of Vista Outdoor to $42 a share.

The shareholders meeting to approve the CSG deal, already postponed once from May, was postponed again, and a summer of deal-making volleys began. At issue in all the back and forth was the value of Revelyst.

CSG by the end of the summer raised its bid for Kinetic to $2.15 billion and added a $150 million equity investment in Revelyst, which was still planned to be spun off as a standalone public company. MNC's final bid was $43 a share or approximately $3.2 billion.

In a new twist a SEC disclosure revealed that an unnamed investment firm that had been partnering with MNC Capital since the start of the year was interested in buying Revelyst.

The group turned out to be Strategic Value Partners (SVP), a Connecticut investment firm with about $19 billion in assets and diversified investments from parking lots and toll roads to food ingredients and biofuels. SVP was willing to buy Revelyst "separate and apart" from its participation in the MNC bid. The only caveat was that the deal close at the same time as the CSG deal to acquire Kinetic.

Vista announced the new $1.125 billion offer for Revelyst on Oct. 4 with SVP; combined the CSG and SVP offers equated to $3.35 billion, or $45 per share, for Vista's pieces, meaning they were more valuable than MNC's final bid.

Closing the deal

The plans still have to meet shareholder approval at the Nov. 25 special shareholder meeting.

The final deal has pros and cons for Minnesota.

It keeps intact the Federal operation, which has been making ammunition in Anoka for more than 100 years.

But it potentially loses headquarters jobs for two public companies. CSG has pledged to keep Kinetic based in Anoka. Revelyst will likely move to Rhode Island.

Federal has gone through a string of corporate owners since it was acquired by Pentair in 1988. One of the unspoken benefits of the Kinetic Group becoming a standalone public company would have been independence for the ammunition brands.

The Kinetic Group and Federal would not have been able to deploy their own capital, set their R&D budgets, or decide on new markets to enter without having to ask permission from a corporate parent. Now they'll be a subsidiary of a larger parent company.

"From a headquarters standpoint, Minnesota loses a major public company headquarters, and this is a headquarters economy, and that matters for all sorts of reasons," said Paul Vaaler, a professor at the University of Minnesota's Carlson School of Management.

Federal stays strong under several owners

Federal started making ammunition in Anoka in 1922 and has become a bedrock of the community. For more than half of its existence, it was a privately held, family-run business. Under the latest deal, Federal would become a subsidiary of CSG.

Here's a timeline of Federal's ownership:

1922: Charles Horn started the ammunition business.

1988: Pentair bought out the private group of owners.

1997: Blount International bought Federal.

2001: Alliant Techsystems (ATK) bought Federal for $250 million.

2015: Alliant Techsystems spun off its outdoor division, renaming it Vista Outdoor.

2023: Vista renames the ammunition brands business the Kinetic Group in preparation for a split into two companies, the other being the outdoor brands under the name Revelyst.

2024: The Kinetic Group, including Federal, will be acquired by the Czechoslovak Group for $2.15 billion if shareholders approve the sale.