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Deals

Czech gunmaker CZG's scaled-down IPO secures cash for U.S. plant

PRAGUE (Reuters) - Czech gunmaker CZG-Ceska Zbrojovka Group CZG.PR dramatically reduced the size of its initial public offering, a rare new listing in Prague, after weak demand for its shares.

CZG, which operates in the Czech Republic and the United States and whose firearms include CZ (Ceska Zbrojovka), Dan Wesson and Brno Rifles, had originally looked to raise up to 4.8 billion crowns ($209 million) to help fund its U.S. expansion.

But it said on Friday that gross proceeds from the IPO were 812 million crowns ($35 million) 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.

CZG said it aimed to use part of the IPO proceeds to build a factory in Little Rock, Arkansas. Construction of the new U.S. plant, which is estimated to cost up to $70 million, has been delayed by the COVID-19 pandemic.

Lubomir Kovarik, CZG’s chairman, said the plant, which will help CZG tap U.S. segments often protected by “Buy America” laws, should be operating by the end of 2021.

CZG is a wholly-owned unit of Ceska Zbrojovka Partners, whose main owner is Rene Holecek, who Forbes listed as the 30th richest Czech citizen in 2019.

Market sources told Reuters that demand had been weak for CZG’s IPO, which gave it a market capitalisation of 9.5 billion crowns and a free float of between 8.6% and 9.4%.

CZG had originally offered up to 6.9 million new shares out of a total of 12.99 million.

Kovarik also said CZG could do another offer in the future.

CZG reported record revenue of 3.4 billion crowns in the first half of 2020, generating attributable profit of 381.7 million crowns and said it will target paying out 33% of its full-year consolidated net profit in dividends.

($1 = 22.9520 Czech crowns)

Reporting by Jason Hovet and Jan Lopatka; Editing by Alexander Smith

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