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Alliant to Buy Caliber Company

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Alliant Techsystems Inc. announced to snap up Caliber Company with a deal value of $315 million in cash, subject to customary working capital adjustment. The company expects to complete the transaction in first-quarter of fiscal year 2014, which will end on Jun 30, 2013.

The new acquired unit will come under Alliant Techsystems’ Sporting Group segment. The completion of this transaction is subject to the regulatory authorizations and customary closing conditions.

Caliber Company is located in Westfield, MA and Lakefield, Ontario. Savage Sports Corporation is a unit of Caliber Company. The company designs, produces and sells centerfire and rimfire rifles, shotguns and shooting range systems under the brand name of Savage Arms, Stevens, and Savage Range Systems. These ammunitions are utilized during hunting, competitions and recreational purposes.

As of Mar 31, 2013, Alliant Techsystems’ cash balance was $417.3 million and cash provided by operating activities at the end of fiscal year 2013 was $274 million. The company intends to utilize its available cash and funds under the existing credit facility for this acquisition.

In fourth-quarter fiscal 2013, Alliant Techsystems’ Sporting Group segment registered a 14% year-over year increase in sales to $320 million due to expansion in unit volume and ammunition price hike. We believe this acquisition will not only help the company to strengthen its presence in the state but will also add customers.

Alliant Techsystems expects this acquisition to be accretive to the company’s earnings, given Caliber Company’s presence in hunting rifles, shotguns, commercial and security ammunitions and shooting sports domain. It is also likely to enhance the company’s product coverage while strengthening its market penetration.

We consider Alliant Techsystems’ latest take-over as a significant step toward product portfolio diversification. We believe this acquisition will further boost the company’s financial performance and bring in earnings flow from different streams.

Alliant Techsystems currently has a Zacks Rank #2 (Buy). Apart from Alliant Techsystems, other stocks in the sector that are worth considering include Astronics Corp. (ATRO - Free Report) , Hexcel Corp. (HXL - Free Report) and Orbital Sciences Corp. with a Zacks Rank #2 (Buy).

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