CSG's Strnad Targets Italian Tyre Maker Pirelli While Ramping Up US Munitions Capacity

Czech billionaire Michal Strnad's CSG enters talks for up to 20% of Pirelli from Sinochem, as defense firm expands US artillery shell plant and faces stock slump.

Michal Strnad, the chief executive and majority owner of Czechoslovak Group (CSG), is pursuing a deal that would steer the defence conglomerate into completely new territory. The Czech billionaire has opened discussions with Chinese group Sinochem about acquiring a slice of the Italian tyre giant Pirelli. Strnad is partnering with fellow Czech tycoon Pavel Tykac on the bid, which could see the pair take between 10 and 20 percent of the Milanese manufacturer. Sinochem currently holds roughly 34.1 percent of Pirelli. Talks remain preliminary and a transaction is far from guaranteed, but the move signals Strnad’s ambition to channel the windfall from Europe’s rearmament cycle into bets beyond the battlefield.

Strnad controls around 85 percent of CSG, a Prague-based industrial group best known for artillery systems and tactical vehicles. The Pirelli courtship comes at a time when the company is pushing hard into the United States market. On 1 July, CSG formally launched a new division called CSG Land Systems North America, headquartered in Michigan. The unit will represent three established NATO suppliers — Excalibur Army and two Tatra divisions — inside the U.S. defence ecosystem. Jason Alejandro Monahan, a veteran from a major American defence contractor who previously oversaw a multibillion-dollar portfolio, has been named president of the new entity.

The Michigan outpost builds on an earlier American foothold. Last year, CSG subsidiary MSM Group North America secured a contract to construct a plant in Iowa dedicated to 155-millimetre artillery shells. Once operational, the facility is expected to churn out 36,000 shells every month, accounting for a significant share of the U.S. Army’s long-term target of roughly 100,000 rounds monthly. CSG has already demonstrated its Morana self-propelled howitzer — which pairs an automated fire-control system with a Tatra chassis — to Army officials during a live-fire event in March.

Despite the transatlantic expansion, CSG’s stock has struggled to shake off a prolonged downturn. The shares ended last week at 14.59 euros, barely changed from the prior session, after tumbling to a 52-week low of 12.20 euros on 26 June. Over the past seven days the stock did rally more than 14 percent, but that recovery still leaves it some 59.5 percent below the January high of 36.05 euros. The broader defence sector took a knock this week when the Franco-German armoured-vehicle group KNDS postponed its planned initial public offering on 2 July, citing unfavourable market conditions and recent share-price slides at peers such as Rheinmetall and CSG.

Additional headwinds are coming from within CSG’s own orbit. A shareholder dispute at the Tatra Trucks subsidiary is weighing on sentiment, and the European Commission is currently reviewing a planned change in minority ownership at the company. On the charts, the 14-day relative strength index stands at 48.9, a neutral reading that suggests the violent moves of recent weeks have given way to a calmer tone. Still, the annualised 30-day volatility remains elevated at 55.9 percent, and the stock continues to trade below its 50-day moving average of 15.97 euros.

August 7 marks the next key catalyst. CSG is due to report first-half earnings on that date, and investors will be scrutinising the numbers for evidence that its estimated 15-billion-euro order backlog is translating into tangible revenue. Without clear inflows from the new U.S. operations, the shares are likely to remain hostage to the sector’s jittery mood and the unresolved legal questions surrounding Tatra.