Proxy adviser ISS changes view on Vista Outdoor deal
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U.S. Treasury Secretary Janet Yellen. Treasury oversees CFIUS, which is currently reviewing Vista Outdoor's deal to sell its ammunition unit to the Czechoslovakia Group. Photo: Getty Images.
Institutional Shareholder Services issued an updated recommendation on Vista Outdoor's $1.96 billion deal to sell its ammunition unit to a Czech buyer, saying it now advises investors to abstain on the vote.
Why it matters: ISS' reversal is a blow to Vista Outdoor, as the company is counting on shareholders to approve the deal at a July 2 vote.
Catch up quick: After Vista and the Czechoslovakia Group (CSG) signed their deal last October, investment firm MNC Capital offered to buy the entire company for around $3 billion.
- In addition to selling ammo, Vista also sells outdoor gear such as camping equipment and CamelBak water packs. The ammo business is known as the Kinetic Group, and the gear division is called Revelyst.
- ISS said on June 3 that it recommended Vista shareholders vote for the CSG deal, noting that the company ran a proper sale process that resulted in the Czech buyer raising its offer price. Fellow proxy adviser Glass Lewis also recommended for the deal.
- The meeting to vote on the deal was scheduled for June 14 at the time.
Zoom in: Since early June, MNC raised its offer and a rival bidder, JDH Capital, briefy emerged to top CSG's ammo unit agreement. JDH has since withdrawn its bid.
- The intensifying action around Vista Outdoor this month appears to have prompted ISS to make a rare update to a recommendation. MNC's latest bid is $39.50 per share, or around $3 billion.
- Vista has had to postpone its shareholder vote several times and is still waiting for the U.S. government to sign off on the CSG deal.
What they're saying: In an "Update" note issued on Thursday, ISS said it's changing its recommendation..
- "We find that given the regulatory risk surrounding the CSG offer for Kinetic and the valuation uncertainty of a standalone Revelyst, MNC's $39.50 bid forms, at the very least, a reasonable basis for negotiating a cash transaction that would represent a better risk-adjusted outcome for shareholders," ISS wrote.
- The proxy adviser recommended shareholders abstain on the CSG merger agreement, and support a plan whereby Vista adjourns the special meeting again and reengages with MNC.
- Vista said in a statement to Axios that its confident the CSG deal will receive government clearance and that MNC's offer undervalues the Revelyst business.
- "We firmly believe that a transaction with MNC would not be more favorable to Vista Outdoor stockholders from a financial point of view than the pending transaction with CSG," the company said.
Reality check: ISS recommendations have significant influence over shareholders, but the proxy adviser's advice does not always sway a voting outcome.
- Disney shareholders' unanimous support of its board at the April meeting is a case-in-point of investors going a different direction than a proxy adviser recommendation.
What we're watching: The government is expected to issue its decision on the Vista-CSG deal later this month, but there are no guarantees on the timing and ISS suggests a ruling could come after the November U.S. Presidential election.
Editor's note: This story was updated with Vista Outdoor's statement.
