Gunmaker's Investors Chafe at Plan to Sell Firearms Business

(Bloomberg) -- Vista Outdoor Inc., which has drawn criticism in recent weeks for owning a firearms business, tumbled the most in almost six months after saying it wants to sell its gun brands.

Vista’s Savage Arms unit will be up for sale as part of a “strategic business transformation plan,” that will retain a focus on selling ammunition, according to a statement Tuesday.

“Our review identified product categories that are core to the company’s long-term business strategy,” said Chief Executive Officer Chris Metz. “Vista Outdoor is excited about the potential of each of our core businesses, particularly ammunition, which is our largest.”

The planned exit would put Savage on the market just as Remington Outdoor Co. faces bankruptcy and a potential sale. Certain stakeholders in Remington have started putting out feelers for potential strategic buyers of the gunmaker’s 13 brands, which include firearms, gun accessories and ammunition manufacturers, Bloomberg News reported in late April.

A competing firearms company could make a grab for Savage. Christopher John Killoy, CEO of Sturm, Ruger & Co., said earlier this month that he would watch the Remington bankruptcy closely to “see if there may be some opportunities down the road.”

Vista slid 13 percent to $14.56 at 2:35 p.m. in New York after tumbling as much as 17 percent, the biggest intraday decline since Nov. 9.

Parkland Pressure

The Farmington, Utah-based company began a strategic review in November, and pressure mounted following a February shooting at a high school in Parkland, Florida. Recreational Equipment Inc. and other retailers cut ties with Vista.

Vista’s Savage unit focuses on rifles, including the kind of assault-style weapons that have drawn scrutiny in the wake of mass shootings. Vista is considering additional divestitures, such as its Bell bike helmets and Jimmy Styks paddle boards. The company said the sales would provide cash that it could invest in its remaining products, possibly through acquisitions.

Lagging Business

Vista was a late entry in what the industry calls "modern sporting rifles," and hasn’t invested enough in product development and marketing to obtain a market-leading position, said Rommel T. Dionisio, an analyst at Aegis Capital Corp.

The regulatory environment for firearms remains uncertain in the wake of the recent Parkland tragedy, which "may also be a factor in their decision to exit the firearms market,” Dionisio said.

Gun industry sales have risen along with public protests and increased investor scrutiny. Though the government doesn’t keep exact data on firearms sales, the FBI’s National Instant Criminal Background Check System serves as a barometer of transactions. In March, checks were up 11 percent from the previous year. Long-gun checks, which include assault-style rifles, increased more than 17 percent.

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