(Bloomberg) -- Rheinmetall AG is set to buy a US military vehicle specialist for $950 million as the German company seeks to expand its position in the world’s largest defense market.
The acquisition of Loc Performance Products LLC, which makes track systems for tanks and agricultural vehicles as well as hulls for combat platforms, will boost Rheinmetall’s production capacity in the US, the company said late Tuesday. The US market for army vehicle programs has a total potential of over $60 billion of orders, it said.
The American market is a strategic priority for Rheinmetall. The maker of the Leopard tanks and ammunition said in June it will expand its collaboration with Lockheed Martin Corp., the world’s largest defense company. Joint developments already include a rocket launcher able to cover a distance of some 400 kilometers (249 miles).
The deal with Loc will add about 1,000 skilled workers, the company said, while the transaction is subject to regulatory approvals. Rheinmetall’s shares rose as much as 2% Wednesday in Frankfurt trading, adding to the stock more than doubling over the past year to €24.3 billion ($26.8 billion).
What Bloomberg Intelligence Says:
Rheinmetall seeks greater US manufacturing presence through its $950 million acquisition of Loc Performance to better compete against General Dynamics on the XM30 program (valued at over $60 billion) and Mack Defense, Navistar Defense and Oshkosh Defense on the Common Tactical Truck program (about $16 billion). Loc is a defense supplier with content on existing Army combat vehicles.
— BI Industry Analyst Will Lee
Rheinmetall is among a number of European weapons contractors that has seen sales surge to records amid the growing threat from Russia. Earlier this month, Chief Executive Officer Armin Papperger said revenue is set to rise by about €2 billion annually after investments in additional capacity and acquisitions since Russia’s annexation of Crimea in 2014. For this year, revenue is expected to rise to around €10 billion.
The company is also expanding its presence in Europe. Rheinmetall and Leonardo SpA last month said they’ll work together on developing a new main battle tank and platform for an armored infantry combat vehicle to the Italian Army.
(Updates with analyst comments in fifth paragraph. A previous version of the story corrected the spelling of CEO’s name)
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