Vista Outdoor Inc. (VSTO) signed an all-cash deal valued at $474 million to buy Foresight Sports, a designer and manufacturer of golf performance analysis, entertainment, and game enhancement technologies. The transaction is expected to close in the third quarter of Fiscal 2022. Shares jumped 2.9% on the news, closing at $41.44 on September 10.
Vista Outdoor is a designer, manufacturer, and marketer of outdoor sports and recreation products. Foresight Sports is an industry leader in golf technology and has developed both on- and off-course categories.
The acquisition of Foresight Sports will boost VSTO’s presence in higher growth and less cyclical outdoor products markets and positions the company as a technology leader in the golf industry. (See Vista Outdoor stock charts on TipRanks)
Commenting on the deal, Chris Metz, CEO of Vista Outdoor said, “Together under the same roof, Bushnell Golf and Foresight Sports will elevate their brands’ strengths, engage and expand into new segments of the industry and drive growth and brand awareness at unprecedented scale.”
Metz added, “With more than 36 million golf participants in the U.S. alone, combined with growth in international, digital, and off-course settings, Vista Outdoor is well-positioned as a leader in golf data collection, hardware development, game improvement, and accuracy.”
The purchase will be funded with cash on hand and VSTO’s existing undrawn liquidity under its asset-based revolving credit facility. Also, additional contingent incentives of up to $25 million will be paid to Foresight Sports on achieving certain net sales targets.
The deal is expected to be immediately accretive to Vista’s earnings, excluding transaction and transition costs. Also, VSTO projects that its leverage ratio will be well below 1.5x upon closing, and below 1.0x at Fiscal 2022 year-end.
Furthermore, Foresight Sports forecasts full-year 2021 net sales and adjusted EBITDA of $100 million and $50 million, respectively.
Following the news of the acquisition, B.Riley Financial analyst Eric Wold reiterated a Buy rating on the stock with a price target of $63, implying 52% upside potential to current levels.
Wold said, “In addition to expanding the company’s golf product and technology reach off the course, we view the transaction positively as one that will help to drive consolidated AEBITDA margins higher and further diversify the company’s product mix away from firearms-related segments—all without stressing the company’s balance sheet, which has vastly improved over the past 12-18 months.”
With 7 unanimous Buys, the stock commands a Strong Buy consensus rating. The average Vista Outdoor price target of $54.50 implies 31.5% upside potential to current levels. Shares have gained 113.8% over the past year.
Vista Outdoor scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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