Colt CZ buys Czech ammunition producer Sellier&Bellot

Prague/Uhersky Brod, South Moravia, Dec 18 (CTK) - Colt CZ Group SE (Colt CZ) executed an agreement with CBC Europe S.a r.l. (CBC) to purchase 100 percent interest in Sellier & Bellot for the combination of the cash consideration in the amount of USD350m (over Kc7.8bn) and a new issue of Colt CZ common stock, Colt CZ said.

This will lead to a 27–28 percent CBC's stake in the share capital of Colt CZ Group post transaction, Colt CZ representatives told CTK in a press release today.

CBC's final stake in Colt CZ will be determined depending on this year's audited financial results of both companies.

Financing for the acquisition is planned to be a combination of cash and debt financing, Colt CZ said. The transaction is subject to regulatory approvals in various countries and is expected to close in the first half of next year

Shares in Colt CZ on the Prague Stock Exchange increased by 1.16 percent to Kc524 per unit this morning, the bourse said on its website.

"The acquisition of Sellier & Bellot fits into our long-term strategy to expand not only in our core segment of small arms, but also in related industries where ammunition is a natural complement to our products," said Colt CZ president and board chairman Jan Drahota.

CBC will become the second largest shareholder of Colt CZ, he added.

"The successful contribution of one of CBC Global Ammunition Group's flagship companies to Colt CZ Group in exchange for a significant shareholding marks the starting point of an impactful strategic collaboration," said Fabio Mazzaro, CFO of CBC Global Ammunition LLC.

"We are convinced of Colt CZ management's long-term vision and believe the transaction will lead to remarkable value creation between the ammunition and firearms segments. Our subsidiary Magtech Ammunition will continue to serve as the dedicated sales entity for Sellier & Bellot products in the United States," said Mazzaro.

Sellier & Bellot's product portfolio includes a wide range of hunting and sporting ammunition and components for pistols and revolvers, rifles, shotguns and rimfire cartridges. Sellier & Bellot is also a major supplier of small caliber ammunition to military and law enforcement customers worldwide. The company has approximately 1,600 employees.

"We will continue to build our traditional brand and work closely with the Colt CZ Group team to develop our products to deliver the best solutions to our customers," said Sellier & Bellot CEO Radek Musil.

Colt CZ shares on the Prague bourse are rising, so investors apparently agree that the purchase of Sellier & Bellot will create additional added value for the company, analysts approached by CTK have said.

Before 12:00, Colt shares were up 1.35 percent to Kc525 per unit.

XTB analyst Tomas Cverna views the acquisition as strategic with high potential for a positive impact on the company's performance. Sellier & Bellot is a growth and, above all, profitable company. "The purchase of Sellier & Bellot will lead to a greater concentration on the domestic arms market, with the largest share going to Colt and Czechoslovak Group," said Cverna.

The growth of the acquiring company's shares is generally not the rule, said Trinity Bank analyst Lukas Kovanda. It is relatively common for these shares to fall after the takeover is announced, as investors fear that the intentions of the transaction may not be fulfilled, or are concerned that the more money goes to finance it, the less goes to them in the form of profits, that is dividends, said Kovanda.

Jiri Hynek, president of the Czech Defence and Security Industry Association, considers the acquisition to be very positive news. "It shows the growing strength and importance of the Czech defence industry. I am convinced that this merger will also translate into an increase in exports," he said.

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