Rheinmetall is acquiring Luerssen Group's warship division, NVL, it said late on Sunday, as the German defence group seeks to expand its activities in Europe as governments step up military spending.
The move by Rheinmetall, Europe's largest maker of ammunition, comes as a long-awaited consolidation in Germany's naval sector picks up speed, with submarine and frigate maker TKMS to be spun off from parent Thyssenkrupp next month.
It also highlights the German firm's aim to expand in light of current geopolitical tensions in Europe, also reflected by a recent framework agreement to build a munitions ignition powder factory in Romania.
The companies agreed not to disclose the purchase price for NVL, it said, adding they aim to complete the transaction early next year, subject to antitrust approval.
"The current conflict situation reveals that military enforcement capabilities are also becoming increasingly important in the naval sector," Rheinmetall said, chiming with comments from Luerssen.
Its shares were 1.9 per cent higher at 07:52 GMT at the top of Frankfurt's DAX index.
Analysts at Jefferies said that NVL was generating double-digit margins, suggesting a takeover price of €1.5 billion-€2 billion ($1.76 billion-$2.35 billion) excluding debt.
Rheinmetall, which makes tanks, grenades and infantry fighting vehicles, has for decades been active in the maritime sector. Reuters reported last month Rheinmetall had signalled interest in taking over NVL, according to industry sources.
Like its peers, Rheinmetall has benefited from higher defence spending as European countries have invested in defence capabilities since Russia's 2022 full-scale invasion of Ukraine.
Germany alone is expected to spend around €31 billion on naval vessels by 2035, Rheinmetall said.
NVL, which employs around 2,100 staff globally, is a privately owned group with four shipyards in northern Germany and international locations.
It made sales of around €1 billion in 2024 and is expected to reach an operating margin of 10 per cent in 2025, according to presentation slides, which Rheinmetall said surpassed rivals including TKMS, Fincantieri and Naval Group.
(Reporting by Madeline Chambers and Christoph Steitz; Editing by Lisa Shumaker and Susan Fenton)