Vista Outdoor’s Ammunition Sale Faces New DOJ Antitrust Scrutiny Amid National Security Review

The proposed $2 billion sale of Vista Outdoor’s ammunition business to the Czechoslovak Group (CSG) has encountered a new obstacle as the U.S. Department of Justice (DOJ) launches a probe into the deal. This development adds another layer of complexity to a transaction already under scrutiny by the Committee on Foreign Investment in the United States (CFIUS).

Vista Outdoor, a Minnesota-based company specializing in outdoor products and shooting accessories, announced the sale last October. The deal encompasses renowned ammunition brands such as Federal, Remington, and Speer. This move aligns with Vista’s strategy to spin off its outdoor products segment into a new independent public company, Revelyst Inc.

The DOJ’s antitrust division has recently begun engaging with third parties, including law enforcement agencies, to assess the competitive implications of the acquisition. Of particular note, the National Association of Police Organizations (NAPO) has voiced concerns in a letter to Attorney General Merrick Garland. NAPO argues that the takeover could lead to a monopoly in the U.S. primer market, a crucial component in ammunition manufacturing.

Currently, Vista holds a dominant position in the U.S. primer market, with Winchester as its sole competitor, producing primers exclusively for its own use. The potential consolidation of Vista’s ammunition unit under CSG, which also owns Italian company Fiocchi, has raised alarm bells in Washington about possible monopolistic control. Fiocchi is in the process of constructing a manufacturing facility in Arkansas to increase domestic primer production.

While the DOJ’s antitrust investigation is still in its early stages, its implications could be far-reaching. The Biden Administration has emphasized antitrust enforcement as a cornerstone of its economic policy, scrutinizing various industries for illegal monopolies. The Justice Department has already initiated legal actions against high-profile entities like Apple and Ticketmaster.

Concurrently, CFIUS, which includes DOJ representatives, is expected to conclude its review by the end of the month. If CFIUS blocks the transaction on national security grounds, the DOJ’s antitrust concerns would become moot. However, should CFIUS approve the acquisition, the DOJ might need to negotiate a delay in the sale pending further investigation or seek a court injunction.

Public reaction to the acquisition has been mixed. Conservative lawmakers, including Ohio Senator J.D. Vance, have expressed unease about a U.S. ammunition manufacturer being acquired by a foreign company, despite CSG being based in a NATO member country. The fact that Vista and CSG previously withdrew and resubmitted their CFIUS request suggests the committee required additional time for review.

A critical juncture in this process is the upcoming Vista shareholders’ vote on the transaction, scheduled for a special meeting on Tuesday. The outcome of this vote will determine the future structure of Vista’s business and the potential emergence of Revelyst Inc. as a new market entity.

It’s worth noting that CSG has twice increased its bid, with the latest offer standing at $2 billion. This comes amidst competition from MNC Capital, led by a former Vista board member, which has presented a $3 billion offer for both the ammunition and outdoor product segments. Despite the higher competing offer, Vista’s board maintains that CSG’s proposition offers greater value to shareholders.

For CSG, this would not be its first major foray into the U.S. market. Last year, CFIUS approved CSG’s acquisition of a 70% stake in Fiocchi Munizioni, an Italian ammunition manufacturer with U.S.-based facilities. This precedent could play a crucial role in the current deal’s approval process.

The NAPO’s letter highlighted concerns about market concentration, stating, “If this proposed transaction were approved, not only would CSG own the leading supplier of lead-free ammunition to law enforcement officers, but the company would also increase its market share in this space due to its current ownership stake in Fiocchi—potentially leading to greater pricing power.”

Despite these concerns, Vista’s board remains confident in the CSG bid. They cite CSG’s expertise in ammunition manufacturing and commitment to the American workforce as key factors. “CSG brings a strong commitment to U.S. manufacturing and our American workforce, along with proficiency in supply chain excellence and ammunition manufacturing,” Vista stated in a press release.

As stakeholders await CFIUS’s decision, the situation remains fluid, with regulatory approvals and shareholder votes playing decisive roles. The Vista Outdoor deal has become more than just a business transaction; it now serves as a case study in competitive markets, regulatory scrutiny, and global business dynamics. The interplay between national security concerns and antitrust issues requires careful navigation, and the outcome of this deal could have far-reaching implications for the ammunition industry and foreign investments in sensitive U.S. sectors.

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