Smith & Wesson parent company splits in two

Citing the “political climate” related to the gun industry and the willingness of banks, insurers and investors to back it, Smith & Wesson said Wednesday it will split from the outdoor products and accessories businesses of American Outdoor Brands Corp.

Smith & Wesson changed its name to American Outdoor Brands (Nasdaq: AOBC) in 2016 as part of a diversification push — the opposite corporate strategy from the one announced Wednesday.

Smith & Wesson has has 1,600 employees at its Springfield manufacturing plant.

Smith & Wesson Brands Inc., based in Springfield, will encompass the firearms business, and American Outdoor Brands Inc., based in Boone County, Missouri, will include the outdoor products and accessories businesses, which sell everything from pocketknives to saws and gun cleaning supplies.

Corporate spokeswoman Liz Sharp didn’t respond to emailed questions Wednesday.

“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,” said Barry M. Monheit, chairman of the board, in a news release. “We believe that separating into two independent public companies will allow each company to better align its strategic objectives with its capital allocation priorities.”

“We also believe that this action will give the investment community clearer insight into the value creation potential in each of these independent companies, ultimately driving enhanced stockholder value,” Monheit said. “From the standpoint of our stockholders, at the time of the spin-off, the AOBC stockholders will own 100% of each company, thereby maintaining their pre-spin interest in both companies, and will thereafter have the ability to make distinct investment decisions tailored to their particular investment profile.”

The combined American Outdoor Brands had a disappointing earnings report in August. Quarterly net sales were $123.7 million compared with $138.8 million for the first quarter last year, a decrease of 10.9%. Profit was just $1.7 million, or 3 cents per diluted share, compared with $11.7 million, or 21 cents per diluted share, for the comparable quarter last year.

Also in August, American Outdoor Brands said its earnings for the year would trail even the lower estimates available at the time.

Retailers like Dick’s Sporting Goods have also pulled back from the gun business in the wake of mass shootings, including one Feb. 14, 2018, where a gunman used a Smith & Wesson rifle to kill 17 students and staff at a high school in Parkland, Florida.

Activists, including Parkland survivor David Hogg, have demonstrated outside the Smith & Wesson factory gates in Springfield. Religious groups, including a national network of Catholic nuns, bought American Outdoor Brands stock in order to influence the company to address gun violence.

Earlier this week, the U.S. Supreme Court decided to allow a lawsuit against gunmaker Remington. Remington is the manufacturer of the Bushmaster rifle a gunman used in 2012 to kill 28 people at Sandy Hook Elementary School. Among the dead were 20 young children.

James Debney, current American Outdoor Brands president and CEO, will lead the outdoor products company.

Mark Smith, currently head of firearms manufacturing operations, will be CEO of Smith & Wesson Brands Inc.

Smith & Wesson traces its roots to 1852, when Horace Smith and Daniel Baird Wesson partnered to manufacture a revolver that used a self-contained cartridge. Over the years, Smith & Wesson made revolvers for Old West gunslingers and the army of the Russian czar. It made guns for the allies in both World War I and II.

Under previous owners, Smith & Wesson faced a ferocious backlash in 2000 after reaching a gun-control agreement with the Clinton administration. The boycotts and protests nearly took down the company.

 

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