ROME (Reuters) -A document and two sources close to the situation say that Germany’s Rheinmetall has sent Italy’s Leonardo an offer for a minority stake in its OTO Melara cannon-making unit. The whole business is worth about $462 million, according to the offer and the document.
Last year, Leonardo put OTO Melara up for sale. Since then, the Russian invasion of Ukraine in February has shown how important it is to have more advanced ground combat systems and for Europe to spend more money on defence and work together more.
According to Reuters, Rheinmetall made a non-binding offer at the end of May and wants to buy up to 49 percent of the company.They asked to remain anonymous because the matter is sensitive.
According to a document obtained by Reuters, Rheinmetall has set a price range of 190 million to 210 million euros for its 49 percent stake in OTO Melara.
In the document, it said that Rheinmetall would be open to buying more than 2% of OTO Melara in the future, which would give it control of the company. This would be in line with the company’s industrial plan and the strategy of its stakeholders.
Shares of Leonardo went up 3% on Friday after the report came out.
Rheinmetall’s move comes after the Franco-German consortium KMW+Nexter Defence Systems (KNDS) and the Italian shipbuilder Fincantieri sent Leonardo a preliminary offer to buy all of OTO Melara and Wass last year.
Leonardo was not available for comment because the sale is part of a bigger plan to focus on helicopters, planes, and electronics for defence. Rheinmetall did not answer an email from Reuters asking for a comment.
GOVERNMENT ROLE
One of the sources said that the Italian government has been told, but that Rheinmetall still needs to get Italy’s support.
Rome has the power to stop takeovers in strategic areas like defence, energy, and banking, or to make them happen only under strict rules.
One of the sources said that Rome wants Italy to be part of the Franco-German Main Ground Combat System (MGCS) tank project, also known as the “tank of the future,” before it agrees to any changes in who owns OTO Melara.
Adding Italy could give Leonardo the chance to make sensors and electronic defence systems for the new tanks.
Mario Draghi, the prime minister of Italy, said that the European Union spends about three times as much on defence as Russia. He said this to show how important it is to work together better.
Brokerage firm Equita said that because the government has the power to step in, a final decision on a sale could still take time.
($1=0.9305 euros)