American Outdoor Brands Investors React Positively To Smith & Wesson Spinoff

Shares of American Outdoor Brands Corp AOBC were trading higher Thursday after the company said it would split its Smith & Wesson gun unit off into a separate public company.

Board chairman Barry Monheit acknowledged that the politcal climate around the issue of guns in the country is now a consideration for the firearms side of the business.

Political Climate

"There have been significant changes in the political climate as well as the economic, investing and insurance markets since we embarked upon what we believe have been our very successful diversification efforts," Monheit said in a statement.

"We believe that separating into two independent public companies will allow each company to better align its strategic objectives with its capital allocation priorities."

Monheit said the move would give shareholders a chance to invest in one part or the other of the company's business if they choose.

At the time of the spin-off, American Outdoor Brands shareholders will own 100% of each company, keeping their pre-spin interest in both. Shareholders "will thereafter have the ability to make distinct investment decisions tailored to their particular investment profile," he said.

The company said the board's vote for a split was unanimous. 

Spin-Off Complete Next Year

The spin-off is expected to be complete in eight to 10 months, and the company said the new firearm company, Smith & Wesson Brands, Inc., is expected to generate revenue between $450 million and $500 million and adjusted EBITDAS between $90 million and $105 million in its first 12 months as an independent company.

Investor roadshows will be scheduled for both companies during the first half of calendar 2020. 

Smith & Wesson, founded in 1856 and one of the nation's oldest and most iconic gun brands, will remain headquartered in Springfield, Massachusetts. 

Leadership Named

The board granted American Outdoor Brands CEO James Debney's request to take over the outdoor products and accessories company, which Debney said has strong growth potential. 

"The spin-off will allow me to dedicate 100% of my energy to growing outdoor products and accessories and help it achieve its appropriate valuation," Debney said in a statement.

The board named Mark Smith, currently head of American Outdoor Brands' manufacturing services division to head up the new Smith & Wesson Brands. 

AOBC Stock

American Outdoor Brands has seen its stock drop by about 37% so far this year. 

The stock was trading 4.88% to $8.28 at the time of publication. 

Related Links: 

Smith & Wesson Maker Had Good Quarter, But Politics Keep This Analyst On The Sidelines 

Gun Stocks: A Look Back And Ahead

Photo courtesy of Smith & Wesson.