Czechoslovak Group (CSG), a Czech weapons and ammunition manufacturer, is in discussions with several banks regarding a potential initial public offering (IPO), with plans to sell approximately 15% of its shares, though a final decision is still pending, according to Michal Strnad, the company's Chairman and owner.
Strnad indicated that in the context of frequent mergers and acquisitions within the defense industry, going public would provide Czechoslovak Group with the option to use its stock as a financing tool for future acquisitions.
He further added that the collaborating banks have suggested a share sale proportion of around 15%.
"This matter depends on many factors, but I am carefully listening to all opinions and forming my own judgment," Strnad stated during an interview at the company's Prague headquarters. The proposed scale of this potential IPO had not been previously reported.
According to the latest data from the Stockholm International Peace Research Institute, the global arms market reached $2.7 trillion in 2024, with Czechoslovak Group being one of the European defense companies with the fastest-growing annual revenue.
Demand for defense stocks is robust.
Spurred by the Russia-Ukraine conflict and sustained increases in NATO defense spending, the defense industry is experiencing a period of rapid growth. This trend has also prompted several defense companies, including the Franco-German tank maker KNDS, to prepare for IPOs, aiming to capitalize on strong investor interest in defense stocks to raise development funds.
Strnad confirmed that information previously disclosed by Bloomberg, citing informed sources, is accurate: BNP Paribas, Jefferies, JPMorgan, and UniCredit are set to act as the global coordinators for Czechoslovak Group's potential IPO.
He mentioned that this IPO plan, most likely to be located in Amsterdam, could see a final decision on its advancement made in the near future.
Joining the ranks of European defense giants.
Strnad declined to comment on the specific fundraising target or the company's valuation for the IPO but pointed to German defense giant Rheinmetall as a benchmark.
"Look at our performance, compare it with our main European peer—the company everyone knows—factor in an IPO discount, since we don't have a customer like the German military, and combining these elements gives a rough estimate of our valuation range," Strnad said.
"However, we certainly don't expect to reach Rheinmetall's valuation level."
Calculations based on London Stock Exchange Group (LSEG) data suggest that, using Rheinmetall as a valuation benchmark and without considering any discount, Czechoslovak Group's enterprise value could be in the range of 34 to 50 billion euros; valued at the industry average, its enterprise value would be approximately 22 billion euros.
LSEG data shows that Rheinmetall's enterprise value to its forward 12-month EBITDA ratio is as high as 21 times, significantly above the industry median of 13.7 times.
Bloomberg had previously reported, citing people familiar with the matter, that Czechoslovak Group was targeting a valuation of 30 billion euros.
Equity financing to fuel future M&A.
The 33-year-old Strnad has rapidly expanded the business founded by his father, leading Czechoslovak Group to a global footprint, which includes the $2.2 billion acquisition of US small-caliber ammunition maker Kinetic Group.
The proposed IPO is expected to involve a combination of secondary and primary share sales. This approach would not only enhance the company's appeal to customers but also add a new financing instrument to its M&A strategy.
"I want to have the option, in potential acquisition deals, to be able to use equity as a means of payment," Strnad stated.
He further added that Czechoslovak Group is currently considering a single listing in Amsterdam, although a secondary listing in Prague in the future is not ruled out.
Even before Russia's full-scale invasion of Ukraine in 2022, Czechoslovak Group had already expanded its operations in artillery ammunition and is now one of Europe's leading producers in this sector.
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