Rheinmetall announced late Sunday that it had reached an agreement with Luerssen Group to purchase the military division of Luerssen Group, NVL. The German defence group is looking to expand its European operations.

Rheinmetall's move, which is the largest ammunition manufacturer in Europe, coincides with a consolidation of Germany's maritime sector, a process that has been long anticipated. Next month, submarine and frigate manufacturer TKMS will be spun off from its parent company Thyssenkrupp.

The German company's desire to expand is also highlighted by the recent framework agreement for building a munitions powder factory in Romania.

It said that the companies had agreed to not disclose the purchase price and added that they hoped to complete the transaction by the beginning of next year, pending antitrust approval.

Rheinmetall stated that the current conflict situation shows how military enforcement capabilities in the naval sector are becoming more important.

Jefferies analysts said NVL generated double-digit margins and suggested a takeover of 1.5 billion euro-2 billion euro ($1.76 billion-2.35 billion), "on a free-of-debt basis".

Rheinmetall, the manufacturer of tanks, grenades, and infantry combat vehicles, has been active in maritime activities for many decades. Industry sources reported that Rheinmetall expressed interest in acquiring Naval Vessels Luerssen (NVL) last month.

Rheinmetall, like its peers, has benefitted from increased defence spending. This is because European countries have invested more in their defence capabilities after Russia's full-scale invasion 2022 of Ukraine.

Rheinmetall's sales for the three-month period ending June fell short of expectations due to delays with German contracts.

NVL, a privately-owned group with four shipyards located in Germany's north and other international locations, is a private company. It employs approximately 2,100 people in all parts of the world. In 2024, sales are expected to be around 1 billion euro. $1 = 0.8527 euro (Reporting and editing by Lisa Shumaker, Susan Fenton and Christoph Steitz)

(source: Reuters)