Expansion of our GROUP by acquisition of new company in Spain

In the course of a few years, our armament company – MSM GROUP – has transformed itself from a local repair shop into the largest arms factory in Slovakia. It succeeded in doing so thanks to numerous acquisitions where companies such as ZVS Holding, Vývoj Martin, 14. Oktobar and Virte all joined the group’s portfolio in recent years.

Our latest addition is a division of the Spanish company Santa Bárbara Sistemas that specializes in the production of ammunition and rockets, being based in Granada (Spain).

It is one of the oldest ammunition production plants in that country. Fábrica de Municiones de Granada is located in the Spanish town of El Fargue and its history dates back to the 14th century.

We are buying this plant from the American company General Dynamics, namely from its European subsidiary General Dynamics European Land Systems (GDELS), which acquired it back in 2001. The GDELS portfolio includes the aforementioned Santa Bárbara Sistemas. The American company is among global leaders in the defence industry. In the past, it made the decision to back out of the ammunition business and rather focus fully on the production of armoured vehicles and weapons.

The acquisition has been underway for more than a year. “As part of our long-term cooperation and good relationships with General Dynamics, we decided to take advantage of the opportunity to enter the ammunition production plant they operate in Granada. In December last year, we signed a contract with them, under which they transferred to us all the assets and liabilities they had to invest in this factory,” confirms Marián Goga.

The factory employs about 60 people with some additional 70 persons working on a temporary basis depending on placed orders.

“We wish to preserve this working team but we do not plan to expand it massively. These are experienced people. On the other hand, the part-time team is very young. So, we are interested in having them trained by the technicians and key employees,” says the CEO.

In addition to that, there is a university nearby which also has a Faculty of Chemistry. Therefore, the Slovak arms factory is not afraid of the lack of qualified personnel.

As with other armament companies, the Spaniards will enjoy a certain degree of independence. Being the latest addition to the MSM Group, the factory will be managed by its local management. “However, we want to have the finances under our control. So, we wish to keep our own people abroad,” he explains.

This acquisition is of strategic importance to our group. “In our discussions with the Americans, we learned about the possibility to enter, as a shareholder, into a major factory in Western Europe, which opportunity we decided to take. We wanted to stop being an Eastern European ammunition producer and to get greater reach by this acquisition allowing us to establish ourselves in Western markets and NATO. It is extremely difficult to establish a foothold in Western markets as public procurement there is not that transparent as they claim it is. In these countries it is a rare event indeed to see a contract awarded to a company coming from Eastern Europe. Therefore, we wish to use the new company to get perceived as a domestic player, among others,” he adds.

Moreover, the Spanish plant fits nicely into the portfolio of MSM GROUP, as similarly to other companies within the group it focuses on the production of ammunition and rockets, although of other types.  In addition to different calibres, the ammunition specifications differ as well. For instance, until now we have not been producing any illuminating ammunition. Also, the Spanish plant has been participating in projects relating to guided anti-tank missiles. By this acquisition, we are gaining know-how and experts.

“The synergies come with the fact that we are internally producing metal ammunition components in Slovakia while they (the Spanish plant) have been buying them from other companies and just loading their ammunition. In this manner, we are able to complement and expand our own production with metal components and import them to Spain. We have been focusing on ammunition because it accounts for up to 65 to 70 percent of our sales,” he explains.

The company has been successful in procurement proceedings in Poland, Estonia, Latvia and it also exports to India, Indonesia and certain African countries, such as Nigeria and Egypt.