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Kalashnikov, AK-47 Maker, Goes Private as Russian Government Sheds Stake

A couple pose for a souvenir photograph holding Kalashnikov rifles at a company stand in Moscow.Credit...James Hill for The New York Times

MOSCOW — Its products are used daily all over the world. It is one of Russia’s most recognizable brands. In recent years, it has diversified, streamlined and remade its image.

Now, the Russian gun maker Kalashnikov Kontsern is undergoing a corporate shake-up. The company will be sold, according to official statements and Russian media reports, effectively privatizing it and reportedly leaving a single investor, Aleksei Krivoruchko, with a controlling stake.

The sale is the latest transformation for the company, which for 70 years has been making Kalashnikov-pattern rifles, popularly known as AK-47s and used by militaries and militant groups around the world.

Kalashnikov Kontsern, based in a city east of Moscow, is the capitalist-era descendant of a state-owned enterprise that first stamped out AK-47s after World War II. The weapon was widely copied throughout the Eastern Bloc and beyond, and about 100 million are in use today.

The company still supplies the Russian Army, but it has since moved on to new moneymaking ventures, like selling rifles to civilians, building speedboats and drones and charging royalties to video game companies for displaying its trademark.

In this way, Kalashnikov Kontsern had typified a broader strategy in Russia’s defense industry under President Vladimir V. Putin.

A state holding company created early in Mr. Putin’s tenure, Rostec, has been trying to improve corporate governance at defense factories and, where possible, to diversify product lines, with an eye toward selling shares to private investors. Rostec sold just under 50 percent of Kalashnikov in 2013, in a partial privatization.

That sale left Rostec with a majority stake in Kalashnikov, while Mr. Krivoruchko held around a quarter of the company, and two other investors, Andrei Bokarev and Iskander Makhmudov, held the remainder.

Two sales — one announced on Friday, the other on Monday — will reshuffle the company’s ownership and put a majority share into private hands.

Rostec has received government approval to sell a 26 percent stake in Kalashnikov, Sergei V. Chemezov, the holding company’s director, said on Monday in Dubai, where he was attending an air show.

Rostec first floated the idea of the privatization in February, but it had not received an endorsement from the government until now. At the time, Kalashnikov said in a press release that Mr. Krivoruchko, a Russian industrialist, would be a buyer. Mr. Krivoruchko’s other investments include shares in suburban commuter trains in Moscow.

“We have just finalized the decision to sell a stake of 26 percent minus one share,” Mr. Chemezov said, in comments carried by Zvezda, a Russian military news site. His comments did not specify the buyer.

Mr. Bokarev and Mr. Makhmudov announced on Friday that they would sell their stakes to Mr. Krivoruchko, the Kommersant newspaper reported on Friday.

Together, the two sales will give Mr. Krivoruchko control of Kalashnikov, with about a 75 percent stake in the company.

Rostec executives say Kalashnikov is profitable and ready for privatization. Last year, the gun maker reported sales of 18.3 billion rubles, or $308 million at current exchange rates, and profit of 3 billion rubles, or $51 million.

Until the crisis in Ukraine prompted the imposition of American sanctions, Kalashnikov had done a brisk business selling civilian rifles in the United States under the Baikal and Saiga brands. The United States is the world’s largest civilian firearms market, and Kalashnikov was selling more rifles to the country’s civilian market than to the Russian military before the sanctions were imposed.

The company has since tried to sell guns elsewhere to compensate for the lost business. Last month, Kalashnikov signed a licensing agreement to produce one variant of the rifle, the AK-103, in Saudi Arabia. It has also encouraged wider civilian gun ownership in Russia. After the American sanctions took effect, the company created a new logo, a line of branded clothing and advertising targeting Russian buyers.

Follow Andrew E. Kramer on Twitter: @AndrewKramerNYT

A version of this article appears in print on  , Section B, Page 7 of the New York edition with the headline: Deals Bring Maker of AK-47 Under the Control of a Single Investor. Order Reprints | Today’s Paper | Subscribe

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