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German hobby hunters buy SIG arms unit

By Nieck Ammerlaan

ZURICH, Oct 4 (Reuters) – Two German hobby hunters are buying most of the
small arms and rifles business of Swiss industrial group SIG Holding AG, SIG
said on Wednesday, announcing the sale as part of a sharper strategic focus.

SIG said it had concluded the long-awaited sale to Michael Lueke and Thomas
Ortmeier, north German textile entrepreneurs.

Both sides agreed not to disclose the selling price of the pistols, hunting
rifles and barrel manufacturing units, but SIG Chief Executive Roman
Boutellier told a news conference the deal would entail a book loss of less
than 200 million Swiss francs.

Lueke, an enthusiastic of SIG’s Blaser rifles, told Reuters he had heard
Blaser was for sale and became interested in the bulk of the arms units after
contacting SIG’s advisers KPMG.

The takeover would be financed through a mix of private funds and bank
credits, said Lueke, who with Ortmeier runs the 150 million mark TWE
industrial textiles group.

The deal, which involves the loss of 100 jobs while 700 are safeguarded,
needs the approval of the monopolies commission.

Boutellier expected the extraordinary deficit from the sale of the
loss-making arms division to be covered by one-off income from the planned
sale of Positec positioning technology business, which is to be completed
before the end of the year.

Trade in shares in SIG, which is increasingly focusing on packaging
technology, was halted. SIG had closed at 1,095 francs on Tuesday for a year
to date gain of 15 percent. The SPI Machinery index .SMAC) has gained 24
percent so far this year.

Analyst Thomas Della Casa at Deutsche Bank forecast a “very, very positive
market reaction” on Thursday. “Many people did not buy the share because of
the arms division.”

He said the stock was favourably valued. SIG has a market capitalisation of
of 1.4 billion francs. This compares with annual sales of about two billion
francs.

BIG INDUSTRY NAMES WERE NOT INTERESTED

The sale to the wealthy private investors came after SIG had been spurned by
industry leaders, who had been reluctant to raise their exposure to the U.S.
market which has been marked by increasing litigation over incidents
involving firearms.

Uncertainty over the outcome of the November elections and the new
president’s attitude to gun control was also a factor.

Boutellier, who did not name the companies SIG had talked to, said
overcapacity also characterised the market, but forecast a return to
operating profit at SIG Arms in 2001.

The SIG arms division makes firearms for law enforcement, military and
special units as well as hunting and target arms.

It includes leading international makes such as Mauser and Sauer and had an
operating loss of two million francs on sales of 70 million francs in the
first half of 2000.

SIG Arms has been shifting to civilian business from the military market as
defence spending has dropped with the end of the Cold War.

The division suffered a blow last year from the expiry of its assault rifle
contract from the Swiss army.

The sale to Lueke & Co omits the assault rifle business, for which SIG hopes
to find a buyer in the next few months.

Swiss state-controlled arms and munitions group RUAG Suisse, which dropped
out of the race for the whole arms division because it saw no synergies with
the sports and hunting files businesses, was a potential buyer, Boutellier
said.

Lueke did not rule out an eventual purchase.

SIG has been transforming itself from a diversified company built around
machinery and engineering businesses into a global group focused on packaging
technology with more than 7,000 employees.

As the final step into its re-positioning, it wants to sell Positec, which
makes electrical motors and automation soft- and hardware for the textile,
packaging and printing industries.

Applications for Positec products include assembly lines, ink dosage and the
precise positioning of printing plates.

Positec had first-half 2000 sales of 94 million francs and operating profit
of eight million with 828 employees.

12:53 10-04-00