Sale of big US ammo business could hit antitrust snag

The controversial takeover of a leading U.S. ammunition business by a Czech conglomerate might hit a new hurdle: the Justice Department’s antitrust lawyers.

The Czechoslovak Group’s purchase of Vista Outdoor’s ammunition business, first announced last October, has been under a lengthy national security review by the Committee on Foreign Investment in the U.S., an interagency panel led by the Treasury Department, which can bar foreign purchases on national security grounds.

But in recent weeks DOJ antitrust lawyers have been meeting with third parties, including law enforcement groups concerned that the deal will lock up the U.S. market for primer, the key ingredient in bullets, according to three people with direct knowledge of the matter. A letter from the National Association of Police Organizations sent last week to Attorney General Merrick Garland also says the DOJ is looking at the deal.

The DOJ’s antitrust inquiry is in the early stages according to one of the people, and it couldn’t be learned whether it will lead to a formal probe of the deal.

The Biden Administration has made antitrust enforcement a cornerstone of its economic policy, investigating industries across the economy for illegal monopolies, and a formal probe of the deal would be an escalation of that approach. This year the Justice Department has filed sprawling lawsuits against Ticketmaster and Apple and the FTC has sued to block major grocery and consumer goods mergers.

The CFIUS review could potentially conclude before the end of the month, though it could also be extended. If CFIUS blocks the deal, the DOJ doesn’t need to take any action even if it has antitrust concerns. But if CFIUS does clear the acquisition the DOJ would need to either negotiate with the companies to delay closing the sale, pending an investigation, or go to court to get an injunction.

Spokespeople for CSG and Vista declined to comment. Spokespeople for the DOJ and CFIUS did not respond for comment.

Vista currently controls a majority of the U.S. market for primer, which ignites the charge and makes a pistol or rifle able to fire. Winchester, a gun maker and the other major manufacturer, makes primer only for its own use. CSG, meanwhile, controls Italian company Fiocchi, which imports primer to the U.S. and is currently building a domestic production center in Arkansas.

DOJ is trying to determine whether the acquisition would leave the bulk of the U.S. primer market in the control of a single company and eliminate a potential competitor to Vista.

Vista is not a household name, but its brands are, spanning from water bottle company CamelBak to Bell bike helmets and Remington bullets.

It’s that last part — the ammunition business — that has some in Washington concerned. The possibility of it falling into foreign hands — even a company based in NATO ally Czechia — is raising alarms among some Republicans.

While the national security review is separate, the Justice Department is a member of CFIUS, and the two sets of concerns are intertwined, with the national security investigators focused on concentrated foreign ownership of a key supplier to the military and law enforcement.

The antitrust issue, however, is new. “[I]f this proposed transaction were approved, not only would CSG own the leading supplier of lead-free ammunition to law enforcement officers, but the company would also increase its market share in this space due to its current ownership stake in Fiocchi - potentially leading to greater pricing power,” the National Association of Police Organizations wrote in its letter last week.

The companies did submit the deal for antitrust review last year as required by law, though no investigation was opened. According to the police association letter, the deal went to the Federal Trade Commission (the FTC and DOJ share jurisdiction for review mergers), which took no action.

An FTC spokesperson declined to comment.

The lack of action last year does not preclude the DOJ from investigating further; mergers can be challenged on antitrust grounds even after they’re closed. That process, though, is decidedly trickier.

CSG board member David Štěpán responded to concerns that it would produce “too great a share of primers” in an April letter to the National Sheriffs' Association. “We are of the opinion that a company like CSG, an expert trader and producer in the defense and small caliber ammo segment based in a NATO country, which holds and develops companies for the long term and not for the sake of quick financial payouts, is the right owner to actually minimize any risks for US customers,” he said. “Further, we remind you that the Federal Trade Commission has cleared the transaction from an antitrust perspective, demonstrating no material anti-competitive concerns.”

The other wild card is a competing bidder for Vista, MNC Capital, whose $3 billion offer for the ammunition business wildly exceeds CSG’s $2 billion. Vista maintains that the CSG offer is better for shareholders, though shareholder advisory service Institutional Shareholder Services last week recommended Vista investors abstain from voting for the deal due to regulatory risk. Instead, the service suggested the company continue negotiations with MNC. An MNC spokesperson declined to comment.