A new Franco-German defense giant

Nexter and KMW sealed their merger in the French Defense Ministry Wednesday after more than a year of exclusive talks over a tie-up.

Signing the deal, corporate and government officials paved the way for the creation of a new entity called Newco.

It will be headquartered in the Netherlands and represent an armored vehicle giant with 6,000 employees and a revenue of about 2 billion euros ($2.2 billion) annually.

Synergy effects

KMW has been known for producing the Leopard tank, with the Leopard-2 sold to 17 nations. Nexter's Leclerc tank, however, has only been in use in France and the United Arab Emirates.

The merger is intended to improve global competitiveness against the backdrop of shrinking national defense budgets. Both firms are hoping the tie-up will save costs in research and development as well as in marketing.

Experts said that after the merger much emphasis would be put on streamlining current production processes while safeguarding jobs. There was no talk of starting a Leopard-3 program right away. But both firms emphasized the tie-up was a contribution towards standardizing production in the heavily fragmented European defense industry.

The merger, which has been billed as one the largest in the defense sector in recent history, is still subject to approval by both nations' anti-trust authorities.

Critics of the deal had voiced concerns the merger would make it easier to circumvent export guidelines for defense products which are a lot stricter in Germany than they are in France.

But a spokesman for the German Economy Ministry, Tobias Dünow, said in Berlin on Wednesday that national export rules would be strictly adhered to.

hg/sri (Reuters, dpa, AFP)