The Czech arms billionaire at the centre of a US ammunition bidding war

Michal Strnad hardly expected his Czech defence company to be labelled a risk to US national security after he announced a near $2bn offer to buy a leading American ammunition maker last October.

Yet the 31-year-old billionaire chair of privately owned Czechoslovak Group (CSG), who is in talks to buy the small-arms ammunition unit of Vista Outdoor, has been thrust into the Washington spotlight and embroiled in a highly political bidding war. 

CSG is one of the defence groups that have emerged as significant players in the West’s drive to arm Ukraine in its war against Russia.

However its pursuit of Kinetic, which mostly supplies ammunition for guns and rifles used by hunters and law enforcement, has stoked American anxiety over foreign ownership of arms makers at a time of global shortages in weapons and shells.

Since the deal with Vista, CSG has come under attack from Republican politicians for “industrial espionage” and “ties to foreign adversaries”, accusations which Strnad strenuously rejects.

At the same time, Vista has attracted counter offers, one touted as “an American alternative” and the other from a wealthy Donald Trump supporter.

Strnad accepts that the Republican-led criticism of his deal comes ahead of US elections. “We understand politicians like to pick up topics which attract the media’s attention regardless of their seriousness or relevance to the business,” he said in an interview.

Having worked at CSG since graduating high school, and watched his father Jaroslav build the company from a scrap metal trader to central Europe’s largest ammunition supplier, this is not the first time Strnad has seen the family company come under fire.

In the past, local investigative media have linked CSG to weapon shipments to Azerbaijan, which is under a voluntary arms embargo by the Organization for Security and Co-operation in Europe. CSG will not comment on whether it exported to Azerbaijan, but says it has never been sanctioned for trading military material.

CSG has also faced criticism for being a leading campaign backer of Miloš Zeman, the former Czech president who pushed for stronger ties with both Moscow and Beijing. The controversial statesman left office in 2023.

The Czech group was founded in 1995 by Jaroslav, who started trading scrap metal collected from the former Soviet bloc, in particular weapons that became surplus military stock in the 1990s. CSG still sells refurbished T-72 Soviet tanks.

The company expanded into munitions production in 2012 by leasing state factories in neighbouring Slovakia. Around the same time CSG bought domestic transport companies, including a rail stock manufacturer and Tatra, a Czech truckmaker that is one of Europe’s oldest vehicle manufacturers. 

In 2018, Jaroslav handed over CSG to his eldest son, who has since led a takeover spree, buying companies including Italian ammunition manufacturer Fiocchi, which owns US facilities in Arkansas and Missouri.

Thanks to the rising global arms demand, CSG’s 2023 revenues surged more than 70 per cent from the year before to €1.7bn while earnings before interest, taxation, depreciation and amortisation jumped 130 per cent to €439mn.

With the boost from the war, Strnad has joined the Czech billionaires’ club, with his net worth now estimated to be $4.4bn according to Forbes, along with the likes of Daniel Křetínský who is building a retail, media and logistics portfolio in Europe, including a recent Royal Mail deal.

The father of two owns a dozen sports cars, which he considers an investment. He stresses that most of his money is put into CSG and acquisitions rather than personal consumption.

Still, he does not rule out floating CSG to raise funding: “Definitely not this year, but . . . we are discussing internally different options for the long-term strategy and one of them is a possible IPO.”

With the purchase of Kinetic, which owns the Remington ammunition brand, Strnad says he wants to diversify CSG’s portfolio, reducing the group’s reliance on government arms contracts and tapping into civilian demand, particularly in the US where about a third of adults own guns.  

Ammunition production has become a critical issue for western nations since Ukraine’s battle against Russia is consuming shells at an unprecedented rate. Although governments have placed orders with defence contractors to replenish stocks, output has been hampered by supply chain challenges.

CSG is now spearheading a Czech government-led Western initiative to buy ammunition for Ukraine, but supply issues have also slowed its efforts.

The possible impact of this global ammunition shortage on availability of products in America is a leading factor behind the US National Sheriffs’ Association’s opposition to CSG’s ownership of Kinetic.

However, Strnad is pledging to maintain US brands and production facilities independently to serve their own customers.

The outcry over Kinetic comes after US Steel’s $15bn takeover by Japan’s Nippon Steel has come under political scrutiny.

CSG already owns small-calibre production facilities in the US after its 2022 purchase of Fiocchi. However, critics of the Czech group’s acquisition include Republican Senator JD Vance, who warned in January that “we cannot afford for America’s supply of weapons to fall into the wrong hands”.

Amid the furore, Strnad now faces rival bids. At the start of the week, Vista rejected one offer for the whole company for $3bn from Dallas-based investment firm MNC Capital Partners, citing worries about financing. Jeffery Hildebrand, one of the richest donors to Donald Trump’s presidential campaign, has also entered the fray with an informal approach.

Vista’s board has continued to recommend the CSG deal but also said it would study Hildebrand’s offer.

For now, Strnad is optimistic about the regulatory screening process conducted by the US Committee on Foreign Investment, which approved the Fiocchi purchase two years ago.

Whatever the outcome of the bidding war, he has his sights firmly on America. “I cannot build a truly global industrial group without going to the US,” he said.

Additional reporting by Sylvia Pfeifer in London