Russian car maker GAZ , which is preparing for a new public stock offering, is spinning off military transport production to remove a possible obstacle ahead of the placement, a GAZ official told Reuters on Wednesday.

"When making GAZ public, we want to separate public and non-public businesses," Pyotr Zolotaryov, head of Russian Machines company, which manages GAZ, told a news conference.

The news agency noted that, under Russian legislation, so-called "strategic assets", or companies which service the military, cannot be sold to foreigners - a law that has complicated a number of attempts to raise capital abroad.

Zolotaryov reportedly said the company being spun off, named Voyenno-Promyshlennaya Kompaniya (VPK), would unite the Arzamas machine-building plant and the Vyksa frame plant.

He declined to mention the date of the share placement but GAZ has previously said it planned the offer for 2007, Reuters said, adding that GAZ also would not reveal production volumes of the new firm or its share in GAZ's total output.

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