Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Rheinmetall has agreed to buy US military vehicle parts maker Loc Performance in a $950mn deal, as Germany’s biggest defence contractor eyes contracts worth billions of dollars with the world’s largest army.
The Düsseldorf-based company said the deal would expand its business with the US military, helping it target “high-volume major orders for US army vehicle programmes” potentially worth more than $60bn. Michigan-based Loc makes parts including track systems and road wheels for combat vehicles.
Rheinmetall has been one of Europe’s biggest beneficiaries of a jump in German defence spending since the start of the Ukraine war, with the group’s share price surging about sixfold since 2022. It is now seeking to carve out a larger share of the highly consolidated US defence market.
Armin Papperger, Rheinmetall’s chief executive, said the US would be an “important core market for us in the coming years”, adding that “everything speaks in favour of this acquisition”.
Rheinmetall is, together with Michigan-based General Dynamics Land Systems, the only company left in the race to develop the XM30 combat vehicle, which has been commissioned by the US army to replace its M2 Bradley infantry fighting vehicle. The contract is expected to be worth $45bn and cover 4,000 vehicles.
The company said it was also applying for the US army’s Common Tactical Truck programme, with the winning company in line for a contract worth roughly $16bn for 40,000 trucks.
Matthew Warnick, managing director of American Rheinmetall Vehicles — part of Rheinmetall’s US-controlled subsidiary — said the company had a “promising position” in the XM30 and CTT projects. “The acquisition of Loc Performance gives us the manufacturing readiness that will enable us to realise the major orders we are aiming for,” he said.
The deal comes after investment firm MNC Capital raised its offer for Vista Outdoor, a US maker of ammunition and outdoor products, last month to about $3.2bn. The higher bid came just hours after privately held Czechoslovak Group cleared the final regulatory hurdle in its bid to acquire Vista’s ammunition business Kinetic for $2bn.
To comply with US regulations on contractors supplying its military, Maine-based American Rheinmetall has its own board and chief executive, Brad Hittle, who has worked with the company’s US arm since 2008. The company must also develop unique intellectual property for the US army.
Loc Performance was founded in 1971 in Plymouth, Michigan, and has since expanded to a total of four manufacturing locations in Michigan and Ohio. The vehicle specialist, which makes drivetrains, suspensions and track systems, as well as rubber and armour products, employs roughly 1,000 people. Rheinmetall said the purchase price for Loc was based on an enterprise value of $950mn.
The company last week announced that it had amassed a record order book worth €48.6bn, as sales and profits have continued to surge amid the escalation of wars in Ukraine and Gaza.
Read the full article here
