Shares of American Outdoor Brands, owned by Smith and Weson, jumped after the company set plans to split the two, saying banks' unwillingness to deal with firearms companies makes the rest of the business more difficult.
The company also saw higher insurance bills, its chief financial officer said on Thursday as the arms industry prepares for the outcome of a Sandy Hook massacre verdict in which 26 people were killed in a US primary school. in 2012.
American Outdoor has announced that it will separate the arms manufacturing business from the rest of the company whose products include knives, marking guns and other outdoor equipment.
The company sought to reduce exposure to unstable arms sales by expanding the accessory market, but acknowledged the "changes in the political climate" that justified a complete split.
Effefri Buchanan, chief financial officer, told analysts the foreign product company should have more access to banks, as some borrowers had policies that prevented them from working with arms manufacturers. He also said the insurance market "has grown stronger in relation to firearms".
Earlier, the company’s president Barry Monkheit said in a statement: "There have been significant changes in the political climate as well as in the economic, investment and insurance markets, as we have become involved in what we believe were our very successful diversification efforts. "
Shares in American Open opened up more than 6 percent on Thursday and were up more than 3 percent in New York's lunch trading.
The company said its restructuring would be implemented as a tax-free dividend to shareholders in the open-air product business, expected to be completed in the second half of 2020.
The results will be two independent, publicly traded companies: Outdoor Products and Accessories Unit, whose brands include Crimson Trace, laser gun tester, and knife maker Bubba Blade, and another made up of Smith & Wesson, a 167-year-old fire maker. weapons and related businesses.
This week, the US Supreme Court refused to block a lawsuit brought by the families of Sandy Shook victims against rival Smith & Weson Remington in the event it could extend its obligations to arms companies.
"We have been working on our insurance here for several months now as the insurance market has grown stronger in relation to firearms," Mr Buchanan told analysts on Thursday. "Every insurance company has already, in essence, called that decision as part of their attention to us."
Firearms manufacturers have struggled with poor consumer sales in recent years. Retailers dealt with weapons in 2016, expecting a flood of demand during the US presidential election season. But sales have cooled after Donald Trump's victory has eased gun owners' concerns about potential new procurement restrictions.
Since reaching a record in 2016, arms sales in the United States have dropped 11% in 2017 and 6% last year, according to the National Archery Foundation, a trading group. However, demand has fallen in recent months, with sales up 10% in October.
US executives said openly that the separation would allow the firearms business to focus on paying off debt and reviving its dividend. Outdoor business will be excluded by any parent debt, which was $ 232 million as of July.
The new brands Smith and Wesnes will produce rifles and pistols under the brand namesake and Thompson / Weapons Center, in addition to making Gemtech suppressors, generating revenue of about $ 450 million to $ 500 million in revenue over the first 12 months as a standalone company. . It will be led by Mark Smith, current president of the product department.
The current chief executive of American Outdoor Brands, James Debbie, is expected to become head of a company with the same name. Its revenue is projected to be $ 200m to $ 210m in the first year.