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American Outdoor Brands Corp. said it will split into two publicly traded companies, one focused on firearms and the other on outdoor products, in an effort to reverse a stock-market decline amid rising pressure for tougher U.S. gun restrictions.
CONSTELLATION BRANDS, INC.
The resulting companies — Smith & Wesson Brands Inc. and American Outdoor Brands Inc. — will be achieved through the spinoff of the outdoor accessories business as a tax-free stock dividend to shareholders. The transaction is expected to be completed in the second half of next year, the Springfield, Massachusetts-based company said in a statement 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,” Chairman Barry Monheit said in the statement.
The plan caps a tumultuous year for American Outdoor, as mass shootings in the U.S. make it more politically sensitive to sell firearms and ammunition. In addition, American Outdoor slashed its profit forecast in August to less than the lowest analyst estimate at the time, citing costs from tariffs on imports from China, where the company has manufacturing operations.
The shares fell 3.1% to $7.65 after the close of regular trading in New York. The shares have tumbled 39% this year. Sturm Ruger & Co., a rival gunmaker, slid 17% during the same period.
For longtime shareholders, the name changes from the spinoff may spark a sense of deja vu. American Outdoor changed its name from Smith & Wesson Holding Corp. about three years ago.
Separating the firearms business could also help the American Outdoor accessory business improve its access to capital. Bank of America Corp. is among financial companies that have announced plans to stop lending to makers of assault-style guns used for non-military purposes, like Smith & Wesson.
After the split, the outdoor business won’t make rifles. But it will still sell accessories that are used in the firearms industry, such as scopes and sights.
Another firearms manufacturer, Vista Outdoor Inc., announced plans last year to unload its gun brand, though the company said it would continue selling bullets.
Gunmakers are finding more resistance from retailers in the wake of multiple mass shootings in the U.S. Earlier this week, firearm manufacturers’ stocks fell after the U.S. Supreme Court refused to block a lawsuit against Remington Arms Co. by family members of some victims of the Sandy Hook massacre in 2012 at an elementary school in Connecticut.
Dick’s Sporting Goods Inc. moved away from gun sales after last year’s school shooting in Parkland, Florida. Walmart Inc. said in September it would discontinue sales of short-barrel rifle ammunition, as well as handgun ammunition. The retailer had faced renewed calls to stop selling guns and ammunition after an Aug. 3 mass shooting at one of its stores in Texas.
Michael R. Bloomberg, founder of Bloomberg News parent Bloomberg LP, is a donor to groups that support gun control.
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