Keep an eye on Lake City ammo, might get more expensive in a few years.

General Firearms Reloading & Ammunition
1

Yesterday Alliant Techsystems (ATK) said it intends to spin off its sporting group as a separate company.

ATK’s Sporting group encompasses all the consumer brands you are familiar with - Savage Rifles, RCBS, Alliant Powder, Federal and Speer, Hoppe’s, Outers, Bushnell. ATK has been on a tear scooping up these companies.

ATK wants to separate this from its DoD business. The DoD portion of ATK owns Lake City.

What I’m concerned about is that ATK is going to hold onto Lake City - it needs to for the DoD.

Based on details I got from yesterday’s conference call, after ATK Sporting Group (spinco) is spun out - ATK (the stubco) will have a three year arrangement to supply Lake City ammo to ATK Sporting Group (spinco).

But what happens after this three year arrangement is up?

I’m a little worried Lake City ammo will get more expensive, because now you are adding a middleman (spinco) to the mix.

Secondly, I kinda wonder if ATK Sporting (spinco) will have an economic incentive to sell Lake City ammo after three years.

After Colt split into two companies earlier this decade, we kinda saw this problem with Colt Defense and Colt’s Manufacturing. Colt Defense made the civilian and LE rifles, but had to sell them through Colt’s Manufacturing (Colt’s Manufacturing owned the Colt trademark) for the civilian market. Colt’s Manufacturing didn’t really have an incentive to sell the rifles because they weren’t making that much money on them.

Time will tell.

2

The moron ammo buyers have proven without doubt they will pay top dollar for ammo.

3

I haven’t bought Lake city ammo in a long time, have a few K sitting in ammo cans, but since it is generally $1 a box of 20 more than PMC Xtac I have no reason to pay more for what I feel is an inferior product. Really should have sold it last year about this time when some local yahoos were buying Lake City M855 for $.70-1+ a round.

4

Corporate mergers and spinoffs, buyouts, etc occur every day. I don’t worry about it.

If LC goes up, buy WCC, RA, Wolf, S&B, Silver Bear, etc, etc.

5

My thoughts too.

6

It could also free up resources to meet civilian demand. Depending on how contracts are set up it may make more sense to spin off the civilian side and allow it to focus on that market than have to come second fiddle to government contracts.