Rheinmetall, Leonardo JV sows seed for EU defence consolidation
Launch partnership for military combat vehicles
First orders will be from Italy, but open to other nations
Rome expected to spend 24 bln euros by 2040 for 1,500 vehicles
Recast, adds quotes from press conference, further details and context
By Giulia Segreti
ROME, Oct 15 (Reuters) -Italy's Leonardo LDOF.MI and Germany's Rheinmetall RHMG.DE launched a joint venture on Tuesday to develop and manufacture military combat vehicles, in a key step for consolidation in the European defence sector.
"This initiative is part of the European game to be stronger in the framework of the Atlantic Alliance. We need to put the seed in the ground of consolidation, and this needs to be done by large companies in the sector," Leonardo CEO Roberto Cingolani told a press conference after the announcement.
The deal comes at a time when European defence companies, benefiting from higher military budgets, appear set for a new wave of large mergers after decades of smaller acquisitions.
"We are creating a new heavyweight in European tank production... we are joining forces to carry out ambitious projects," Rheinmetall's CEO Armin Papperger said.
The executive added that as countries move to renew thousands of ageing vehicles and replenish military stock after the war in Ukraine, the newly-formed partnership could capitalise on a European market worth more than 50 billion euros ($54.5 billion) in the coming years alone.
He added that although the JV was initially addressing the Italian market "we will also be targeting other partner nations which are in need of modernising their combat systems in the future".
Cingolani said that there were also ongoing contacts with European peers over this JV as well as other deals in the making, but did not elaborate.
ITALIAN ORDERS
In the years to 2040, the partnership will benefit from orders from the Italian government for some 1,500 vehicles, of different sizes and functions, for a total of some 24 billion euros, Cingolani said.
The 50:50 partnership - to be named Leonardo Rheinmetall Military Vehicles, or LRMV - was first announced in July, not long after talks between Leonardo and the Franco-German consortium KNDS for the sector had broken down.
First orders are expected at the end of the year or in the first quarter of 2025, with first deliveries in the next two years.
The JV will develop and market the new main Italian battle tank (MBT) and the new Lynx platform for the Armoured Infantry Combat System (AICS) programme, part of the Italian Army's wider programme for its land systems.
The Panther KF51 developed by Rheinmetall will be the basis for the MBT to replace the so-called Ariete in the Italian army.
The JV will have headquarters in Rome and operations in the port town of La Spezia and 60% of the activities will be carried out in Italy, 10% of which in Rheinmetall's sites in the country.
Reporting by Giulia Segreti, editing by Gianluca Semeraro and Keith Weir
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