ATK Spins Off Sporting Businesses and Merges Aerospace Operations with Orbital Sciences

Alliant Techsystems (ATK or Alliant) is merging its aerospace/defense operations with Virginia-based Orbital Sciences. At the same time, ATK plans to spin off its sporting arms, ammo, and outdoor gear operations into a separate, stand-alone business. ATK sells sporting products under numerous brands including Alliant Powder, Blackhawk, Bushnell, CCI, Champion, Federal Premium, RCBS, Savage Arms, Speer, and Weaver Optics. The new Alliant sporting business will operate from Utah, while the merged Orbital-ATK aerospace business will be managed from Virginia.

According to the Washington Post: “The separation of ATK’s core segments gives it the opportunity to focus on its sporting goods sector, which has grown to a $2.2 billion business through several mergers and acquisitions over the past decade. The company manufactures commercial sporting equipment for hunters, shooters and law enforcement agencies.”

The announced merger of Alliant and Orbital, and the spin-off of the sporting business, should benefit Alliant shareholders. Alliant shares rose 8% yesterday. Alliant shareholders will own 53.8% of the new Orbital-ATK aerospace company, and Alliant shareholders will retain full ownership of the new spin-off sporting enterprise. Alliant’s current CEO and president, Mark DeYoung, will take over as chairman and CEO of the new sporting business.

Will the new Alliant Sporting operation continue to grow? Analysts believe that it will. Management has shown interest in building the company via more sporting industry acquisitions. Analysts believe the Alliant sporting division is poised for continued expansion. While Alliant’s aerospace operations have suffered in recent years from cuts in defense spending, the sporting division has seen impressive revenue growth.

According to StarTribune.com: “The sporting unit’s rocket-like growth has captured the attention of Wall Street analysts. Barclays Capital analyst Carter Copeland recently boosted his forecast on Alliant, noting that “over time … the sporting group has made a more significant portion of the total company’s sales and earnings. … The last seven quarters the business has posted average organic growth on a year-over-year basis of 23 percent.”

For those in the shooting community, the spin-off of ATK’s sporting operations is probably a good thing. The new company can focus on guns, ammo, and outdoor accessories, rather than aerospace programs with long development cycles. Likewise the new company should be more responsive to consumers, as it can adjust production to current market demands, rather than fixed government defense contracts. ATK officials stated that “the company’s Sporting and Aerospace/Defense businesses operate in two fundamentally different markets with very different operating dynamics, compliance requirements, customer sets and growth opportunities. As standalone companies, they will be more focused businesses, with clear and distinct strategic visions and objectives, additional operational flexibility and the financial strength to make the most of their unique opportunities in their respective industries.”

Under the terms of the transaction agreement, ATK will distribute ownership of Sporting to ATK shareholders in a spin-off transaction, following which, ATK shareholders will own 100 percent of Sporting. The spin-off will be immediately followed by a merger of Orbital with a subsidiary of ATK, with Orbital surviving the merger and becoming a wholly owned subsidiary of ATK. In connection with the merger, Orbital shareholders will receive 0.449 shares of ATK common stock for each share of Orbital common stock that they hold. Upon the closing of the merger, ATK shareholders will own approximately 53.8 percent of the combined company on a fully diluted basis and Orbital shareholders will own the remaining approximately 46.2 percent of the combined company on a fully diluted basis.