By Robert Wall
German tank maker Krauss-Maffei Wegmann GmbH and France's Nexter
Systems SA on Wednesday are set to formally complete their merger
in a step to rationalize Europe's fractured armored vehicle
sector.
The merger agreement is due to be signed in Paris on Wednesday
in the presence of the country's defense minister Jean-Yves Le
Drian, the French defense ministry said. A German defense ministry
spokesman on Tuesday said state secretary Markus Gruebel would also
attend.
The two agreed more than a year ago to combine into a single
businesses that would have 2 billion euros ($2.2 billion) in sales
to better compete against rivals such as General Dynamics Inc. of
the U.S., and Europe's largest defense company, BAE Systems
PLC.
KMW builds Germany's Leopard-2 tank, used also by countries
ranging from Norway to Chile to Canada. Germany late last year took
delivery of the newest model, the Leopard 2 A7, which weighs around
64 metric tons
Nexter makes the French Leclerc tank and the VCBI infantry
fighting vehicle, a lighter armored combat vehicle than a tank. The
French government this year said it would modernize 200 of the
existing Leclerc tanks in a EUR330 million program.
The German government said in May that it would start work on a
future tank to replace the Leopard-2, which is due to be phased out
around 2030. Design studies, which would run until 2018, are being
carried out with France.
Europe has long had duplication in its arms sector, with
multiple producers of tanks and other wheeled and tracked systems
used by the military.
The European Defence Agency, which includes most European Union
member states, has been urging closer ties among the region's arms
makers to remain globally competitive. The European Union said last
year that U.S. companies in the land defense sector are about 1.5
times as large as their European rivals.
The merger would mark the biggest step in Europe to streamline
the defense sector since the failed marriage in 2012 of BAE Systems
and Airbus Group NV. The German government blocked the combination
fearing a loss of jobs and influence.
The challenge to consolidating weapon makers in Europe was
highlighted again last year when the Swedish government effectively
forced ThyssenKrupp AG to sell Swedish submarine activities to Saab
AB. Sweden sought to reestablish national control over the sector
and has since awarded Saab contracts to develop new submarines.
The EU, whose members states spend far less on defense than the
U.S., has been urging more joint efforts also among governments to
stretch military budgets.
Both France and German in recent months have reversed plans to
cut defense spending amid growing concerns over the rise of Islamic
extremist violence and a more bellicose Russia.
Write to Robert Wall at robert.wall@wsj.com
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