Rheinmetall Bids for Second German Naval Shipbuilder
Rheinmetall, best known as an arms and systems manufacturer, told investors today that it is looking to further expand its recent entry into shipbuilding. The company said the goal is to create a German full-service provider for all branches of the armed forces.
The company closed the acquisition of Lurssen’s naval shipbuilding division, NVL, at the end of February, marking its entry into shipbuilding. It said in the first month of ownership, the new Naval Systems unit generated sales of €77 million ($90 million), and that was already generating profitable growth. The company says it now covers the whole spectrum from the development and manufacture of unmanned naval vehicles to the construction of corvettes and frigates.
It points to the ongoing new-build ship program, which includes the German fleet service vessel (FDB424) and the Bulgarian Multi-Purpose Modular Patrol Vessel (MMPV 90), as key contributors to the business. The repair and refit business is currently being driven by the ongoing repair contract for the frigate Rheinland-Pfalz.
Rheinmetall reports it is also negotiating with the German defense ministry for the construction of the F126 warships. The project, which was a partnership with Daman Naval, has been beset with problems, leading the German government to report it was canceling the construction contract.
To support its naval shipbuilding growth strategy, Rheinmetall revealed today it has also made a non-binding offer to acquire German Naval Yards, based in Kiel, Germany. CEO Armin Papperger reports that due diligence is now underway. They expect to submit a binding offer shortly.
Rheinmetall is competing against TKMS (Thyssenkrupp Marine Systems), which reported its interest in the surface shipbuilder late last year. After being spun off as a publicly traded company, TKMS, best known for its submarines, outlined a growth strategy that includes acquisitions.
The companies are seeking to expand their operations in shipbuilding in response to the anticipated increase in spending by the European governments on defense.
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German Naval Yards focuses on large and technically complex surface naval ships such as corvettes and frigates. The company is currently part of CMN Naval after taking its present form in 2005, when another German shipbuilder, Howaldtswerke, was split into surface shipbuilding, while its submarine operations became TKMS. The German Shipyards Group was launched in 2009 and consolidated with the surface shipbuilding operations in 2011.
Rheinmetall has already expanded its operations, also announcing a joint venture to build cruise missiles and the launch of a line of drones. It also announced this week that it is working with MSC Mediterranean Shipping to make a bid for Romania’s bankrupt Mangalia shipyard. Rheinmetall was recently selected for a four-ship newbuilding program for the Romanian navy, and it says the Romanian yard could become a center for shipbuilding in Eastern Europe.
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