Leonardo, Rheinmetall to form tank joint venture

ROME/BERLIN (Reuters) -Italian defence group Leonardo and German peer Rheinmetall have agreed to form a joint venture to produce tanks and other land defence systems, the two companies said on Wednesday.

The first goal of the 50-50 enterprise, which will be headquartered in Italy, will be to develop the Italian Main Battle Tank and Armoured Infantry Combat System for the Italian Army, they said in a joint statement.

Earlier on Wednesday, German business daily Handelsblatt reported that the Italian government planned to buy hundreds of tanks from Rheinmetall in what would be the group's biggest ever order, valued at around 20 billion euros ($21.50 billion) over a 15-year period.

The Italian defence ministry was not immediately available to comment.

"Technology and industrial synergies between Leonardo and Rheinmetall are a unique opportunity to develop state-of-the-art Main Battle Tanks and infantry vehicles," Leonardo's CEO Roberto Cingolani said after the deal.

"We consider this agreement a fundamental contribution to the creation of a European defence space."

Rheinmetall CEO Armin Papperger said the companies intended to "open the door to a new generation of state-of-the-art combat vehicles in and for Europe."

Final assembly lines, homologation testing, delivering activities and the logistic support will be based in Italy, which will account for 60% of the performed work, the joint statement said.

Leonardo said last month that talks over a tank alliance with the Franco-German consortium KNDS had broken down, but it remained committed to developing a new generation of armoured vehicle platforms for the Italian Army.

Shortly afterwards, a person close to the matter told Reuters Leonardo was in talks with Rheinmetall on a strategic alliance for tanks.

In November, Cingolani said his company wanted to focus on European alliances and create regional giants.

Rheinmetall is targeting record sales of 10 billion euros this year as its order books grow due to boosted defence spending in Europe in response to the war in Ukraine.

According to the Handelsblatt report, Rome will buy at least 350 Lynx armoured fighting vehicles and more than 200 Panther main battle tanks in an order spread over a 15-year period.

Rheinmetall did not deny the report when asked for comment and said it would comment in due course.

Shares in Leonardo were up 3.7% at 1332 GMT, while Rheinmetall was up 4.8%.

($1 = 0.9312 euros)

(Reporting by Matthias Inverardi and Gavin Jones, writing by Miranda Murray, Cristina Carlevaro and Gavin Jones, Editing by Tomasz Janowski)