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European Defense Industry Merger Announced

Bloomberg reports that “Krauss-Maffei Wegmann GmbH, the German maker of the Leopard 2 battle tank, and French rival Nexter Systems SA plan to combine, highlighting the pressure facing Europe’s defense industry to gain scale and cut costs.”  

“The parent companies will each own 50 percent of a holding company with revenue of almost 2 billion euros ($2.74 billion) and more than 6,000 employees, they said yesterday, after signing an agreement in Paris. The companies will next perform due diligence, and the merger is set for completion in early 2015, pending regulatory approval, they said.”  

“The announcement comes less than two years after Airbus Group NV (AIR) sought unsuccessfully to combine with BAE Systems Plc (BA/) to enhance its defense capabilities, which have come under strain as governments cut budgets. Krauss-Maffei and Nexter said their products have little overlap, and that merging will help them compete internationally and preserve jobs and know-how in Europe.”