William Malcolm

Ceska Zbrojovka Group Scales Back IPO On Weak Demand

CZG-Ceska Zbrojovka Group dramatically cut the size of its initial public offering, after weak demand for its shares.

CZG had initially looked to raise up to 4.8 billion crowns to help fund its US expansion.

On Friday, it said that gross proceeds from the IPO were 812 million crowns after cutting the offering to 2.8 million new shares, plus up to 280,000 in an over-allotment.

The shares were priced at 290 crowns and rose to 304 crowns on the Prague stock exchange, which faces the challenge this year of some companies planning to de-list.

The company wants to use the money to finance development plans in the USA, where it has a new production plant in Little Rock, Arkansas. Investors from the Czech Republic applied for the majority of shares, almost a tenth of the shares were allocated to small investors.

“As a result, approximately ten percent of our employees in the Czech Republic decided to participate in the offer, which is a proof of their trust in the company for us,” said CZG Chairman of the Board Lubomír Kovařík.

According to the Reuters agency, CZG reduced the offer of its shares on the Prague Stock Exchange by three quarters, when it originally intended to sell up to about 13 million shares and thus gain up to four million crowns. According to Jan Drahota, Deputy Chairman of the Board of Directors and CFO of CZG, the company has decided to reduce the transaction size and not sell the current shares for the time being because it believes in a further increase in the value of CZG. “We have managed to raise sufficient funds to finance the expansion of our presence in the US market,” he added.

After the public offer, the share price is at the bottom of 290 to 370 crowns. CZG stated that the set price corresponds to the company’s market capitalization in the amount of 9.5 billion crowns. According to the company, the public offer should be settled around 6 October. “Following the completion of the offer and the registration of the share capital increase, the total number of shares in the company will be 32,638,000 shares,” added CZG. There will be 8.6 percent of the company’s shares on the market and, in the event of the full exercise of the option to cover a possible increase in the offer, up to 9.4 percent of CZG shares.

Most of the shares of Uherské Brod-based armory belong to a company controlled by businessman René Holeček. Česká zbrojovka’s shares were traded on the Prague Stock Exchange from the mid-1990s until November 2007. After the crowding out of the minority shareholders, they ended up as the primary owner, which was the Prague company EXIMAT.

The CZG Group is one of the leading European manufacturers of small arms for the armed forces, personal defense, hunting, sport shooting, and other civilian uses. It manufactures pistols, submachine guns, assault rifles, and rifles. The company has production plants in the Czech Republic and the United States and employs approximately 1,625 people in its operations in the Czech Republic, the United States, and Germany.