Report: KMW, Nexter to sign merger agreement

DUSSELDORF, Germany, May 27 (UPI) -- Two major European defense companies plan to establish a joint-venture holding company and consolidate their businesses.

German newspaper Handelsblatt reported an agreement for the consolidation by Krauss-Maffei Wegmann and Nexter is expected to be signed in July following a year of negotiations between the companies and the German and French governments.

"Our goal is to sign in July, the 13th would be nice, but the 14th of July [a French national holiday] would be nicer," KMW's chief executive Frank Haun was quoted as saying at a business conference in Paris.

Krauss-Maffei Wegmann manufactures tanks. Nexter, which is government-owned, makes artillery. Haun, speaking at a conference sponsored by the business newspaper Les Echos, said the two companies have been privately talking merger since 2006. Public comment on a possible merger was made in 2014.

Handelsblatt said the "alliance between the two leading European tank and cannon manufacturers will be the biggest consolidation in the European defense industry since the founding of EADS/Airbus in July 2000, and is expected to strengthen the splintered E.U. defense sector."

The two companies employ a total of 6,000 people.

The prospect of KMW and Nexter has apparently led to speculation that they would be in a strong position to gain a contract to build Leopard 3 tanks for the German Army.

KMW is the manufacturer of the Leopard 2, which currently is the German Army's main battle tank. The German Defense Ministry recently announced plans for a new tank in a report to the German parliament, according to Deutsche Welle German radio.

"Technologies and concepts will be investigated between 2015 and 2018 in joint studies also involving German industry," Markus Grübel, a deputy minister in the German Defense Ministry was quoted as saying to his parliamentary colleagues.

The Leopard 2 came into service in 1979 as part of a Cold War homeland defense plan. Only 249 of the tanks are currently in service but in the early 1980s more than 2,000 had been commissioned. Last month, however, German Defense Minister Ursula von der Leyen, citing tensions over Russian aggression in Ukraine, said 100 mothballed Leopard 2 tanks would be brought back into service.

As many as 100 additional armored personnel carriers are also planned for procurement, Deutsche Welle reported.

No information was provided on the possible schedule for reactivating the mothballed Leopard 2 tanks or the financial cost to do so was disclosed in the report.