Iconic Colt Becomes Key for Czech Gunmaker’s U.S. Expansion
(Bloomberg) -- Czech firearms producer Ceska Zbrojovka Group SE said the acquisition of rival Colt Holding Company LLC will help it meet rapidly growing demand in the key North American market.
After agreeing last week to buy the almost two-centuries-old manufacturing icon that underwent bankruptcy five years ago, CZG expects the combined annual revenue to double to $1.2 billion by 2025, Chief Financial Officer Jan Drahota said on Monday. The deal will help the Prague-traded company win public contracts in the U.S. and Canada, on top of its already booming sales to civilian customers.
“Our expectation is that there will be growth in both of these segments, but the military and law enforcement market will be growing more than the civilian one,” Drahota told reporters during a teleconference. “Demand for our products is higher than we are currently able to produce.”
Less than four months after its initial public offering, Ceska Zbrojovka is making an acquisition that will almost double its size and expand its products to include Colt revolvers and machine guns. Its stock has rallied more than 30% since the companies announced progress in the merger talks five weeks ago.
The shares rose 2% to record 400 koruna on Tuesday as of 10:14 a.m. in Prague, valuing the company at 13.1 billion koruna ($619 million).
Ceska Zbrojovka is already selling most of its output in the U.S., where revenue in the first half of last year jumped 57% from a year earlier as social unrest boosted demand for guns. During a White House visit in March 2019, Czech Prime Minister Andrej Babis gave President Donald Trump a gold-decorated commemorative pistol made by CZG.
CZG, which was founded in 1936 and bought American producer Dan Wesson Firearms in 2005, plans to issue bonds and new shares to help fund the Colt investment. As a result of the deal, it has postponed the construction of its own factory in Arkansas, previously scheduled to start in 2021, by three to five years.
Still, CZG sees “quite a bit of room” for both organic growth and potential further acquisitions, which could focus on electronization, optics and ammunition for small arms, according to Drahota.
“Our ambition is to become one of the leaders, or the leader, of the small-arms industry,” he said. “The acquisition of Colt is definitely an important step.”
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