(Updates with official confirmation from France, companies)
PARIS/FRANKFURT, July 1 French arms maker Nexter
and Germany's Krauss-Maffei Wegmann (KMW) have entered exclusive
talks to create a tie-up that would rank as Europe's largest
maker of ground armaments such as tanks, to better cope with
military budget cuts.
The defence firms signed an agreement specifying the broad
outlines of such a joint venture, the French government said in
The two companies said the planned merger, which would see
their owners each take a 50 percent stake in the combined group,
would allow them to preserve jobs in the European Union.
"The two companies' product portfolios and their regional
presence in the world market complement each other almost
without any overlap," they said in a joint statement.
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 owned by German family holding Wegmann GmbH
"The rise in international competition in this industry and
constraints weighing on European armaments budgets call for the
formation of a competitive group benefiting from an enlarged
range of products, skills and complementary expertise," France's
budget, economy and defence ministers said in a separate
Earlier in the day, a source told Reuters that merger talks
Potential post-merger European sales would be close to 2
billion euros ($2.7 billion), the two defence contractors said.
That would put it ahead of Britain's BAE Systems,
currently Europe's biggest defence contractor, and U.S.-based
General Dynamics, in terms of European sales of ground
The order backlog of the combined group would be about 6.5
billion euros and its workforce would be more than 6,000,
according to the statement.
The companies said due-diligence assessments of both merger
parties would be carried out and the tie-up was likely to take
effect in the second quarter of 2015.
($1 = 0.7331 Euros)
(Reporting by Marine Pennetier and Ludwig Burger; Writing by
Alexandria Sage; Editing by David Holmes and Keiron Henderson)