Alarm over the sale of U.S. Steel and Vista’s ammo business is political

There’s probably a movie to be made about the sale of Vista Outdoors’ Kinetic Group. Surely no one at Anoka-based Vista thought it would take more than two years to sell a guns-and-ammo business that includes the well-known brands Federal and Remington.

Now, the climactic final scenes are about to unfold, with some spotlight-seeking Washington politicians making their cameos.

On Monday, Vista announced that a third prospective bidder for the business bowed out because of a conflict of interest with another buyer. We’ll see in the next two weeks whether those two prospects, both of them investor groups from Texas, pull together with a joint bid or some other resolution.

If not, then Vista shareholders on July 2 are likely to accept the board’s recommendation to sell the business to Czechoslovak Group, or CSG, for about $2 billion in cash. CSG formed in the 1990s to sell surplus military stock and scrap metal as the Czech Republic emerged from under the thumb of the former Soviet Union. Today, it is mainly a maker of ammunition and has been a key supplier to Ukraine in its war against Russia.

Part of the drama results from the injection of presidential-year politics into the sale, with politicians saying they’re worried that a U.S. weapons business will be owned by a foreign company.

Similar concerns have been raised about the possible sale of U.S. Steel, which has a sizable presence on Minnesota’s Iron Range, to Japan’s Nippon Steel.

In both cases, more heat than light is being generated by accusatory gestures and overwrought language aimed at CSG and Nippon Steel. Both companies already operate businesses in the U.S. and employ Americans. Both are transparent about their finances with shareholders and regulators.

Both are a test for the Biden administration’s approach to business. They are being reviewed by the Committee on Foreign Investment in the United States, a Cabinet-level panel that operates in a somewhat murky fashion solely to judge whether a deal may harm the nation’s security.

President Joe Biden and former President Donald Trump both oppose the sale of U.S. Steel to Nippon, though neither has cited a national security concern, and Japan, of course, is one of America’s closest allies.

Instead, they use jingoistic language in aiming to secure votes from people who work in the industry or adjacent to it. The United Steelworkers union opposes the sale to Nippon Steel and supports an offer for U.S. Steel by Cleveland-Cliffs. Minnesota’s steelworkers also support Cleveland-Cliffs, even though that would give Cleveland-Cliffs a level of control on the range unseen since John D. Rockefeller pushed out one of the first mining families in the 1890s.

Workers always want assurance that their jobs will be secure under a new owner. Nippon Steel has expressed such assurance, but the steelworkers union believes Cleveland-Cliffs is more likely to preserve jobs. In the Kinetic sale, CSG has also said it will keep the management and employees of the various Kinetic businesses.

Those guarantees only go so far, as anyone in business knows. Employment needs can change with a swing in a business or economic cycle.

I think what really lies underneath all this concern about “foreign-ness” is the cost and structure of the respective deals. CSG and Nippon Steel are offering to entirely pay for the U.S. firms with cash, pressuring other prospective buyers to do the same.

Clouding shareholder and public perceptions with nationalist rhetoric may ease that pressure on the competing buyers. In the process, shareholders may wind up with a lesser deal.

Early this year, Republicans in Congress, led by Sen. J.D. Vance of Ohio, began trying to block CSG from buying Kinetic. He said his concern is not about the size of the deal or its effect on the U.S. market for guns and ammo. He cited news accounts that CSG nearly a decade ago indirectly shipped trucks to Azerbaijan, which European countries have placed under a voluntary arms embargo.

Vance also alleged CSG has ties to Russian premier Vladimir Putin. In numerous statements, CSG executives denied any link to Putin.

Last weekend, the billionaire owner of CSG, Michal Strnad suggested in an interview with the Financial Times that politics was behind the Republican criticism. “We understand politicians like to pick up topics which attract the media’s attention regardless of their seriousness or relevance to the business,” Strnad said.

Late last month, the shareholder advisory firm Institutional Shareholder Services gave its thumbs-up to Vista’s sale of Kinetic to CSG.

ISS noted that Vista had reached out to more than 25 prospective buyers, received five offers and several increases to the offer price. “The cash portion of consideration provides certainty of value” for the Kinetic business, it said.