PARIS, July 1 French arms maker Nexter and
Germany's Krauss-Maffei Wegmann (KMW) have entered into
exclusive talks to create a tie-up that would rank as Europe's
largest maker of ground armaments such as tanks, a source in
France's defence ministry said.
Potential post-merger European sales could amount to between
1.8 billion euros ($2.5 billion) and 2.0 billion annually, the
source said, putting it ahead of BAE Systems, currently
Europe's biggest defence contractor, and U.S.-based General
Dynamics, in terms of European sales of ground armaments.
Both defence firms were due to sign an agreement on Tuesday
specifying the broad outlines of such a joint venture, due not
before 2015, the source told Reuters.
Nexter, maker of the VBCI armoured fighting vehicle and the
Leclerc tank, is owned by the French state, while KMW, known for
its Leopard tank, is family-owned.
The new structure, to be dubbed "Kant", would be 50 percent
held by the French state and 50 percent by the Bode-Wegmann
family, with a Franco-German co-presidency for its board, the
"Today the concerned parties are signing a sort of
engagement contract, a document that describes the big
principles of how the new company would function," said the
source, in the entourage of Defence Minister Jean-Yves Le Drian.
The source added that the signing would open an estimated
nine-month discussion phase that would end in the creation of
the joint-venture likely in the second quarter of 2015.
The Nexter-KMW tie-up comes amid increased competition in
the defence sector and cuts in European countries' ground army
"To be an actor who counts on the European and world stage
you have to have critical mass," said the source, who noted the
joint venture would result in "financial gains for both
(companies) and short-term sales gains without job losses."
($1 = 0.7331 Euros)
(Reporting by Marine Pennetier; Writing by Alexandria Sage;
Editing by Mark John and David Holmes)