UK defence contractor BAE Systems has agreed to sell a 55% majority stake in its UK combat vehicles business to German tank manufacturer Rheinmetall.

The £28.6m deal is part of plans to establish a joint venture (JV) with Rheinmetall to design and manufacture military vehicles in the UK.

BAE Systems Land UK business managing director Jennifer Osbaldestin said: “We are committed to evolving our combat vehicles business so that we better serve our customers’ future interests.”

“Joining forces with Rheinmetall in the UK provides renewed purpose for our vehicles business and allows us to deliver products, services and technology that help land forces excel in their vital roles. We look forward to working together to ensure the Joint Venture is a trusted supplier to the British Army and our international customers.”

To be based at BAE Systems’ facility in Telford, England, the UK combat vehicles JV will also form an integral part of Rheinmetall’s vehicle systems division. The JV is expected to sustain more than 400 jobs in the UK, as well as preserving crucial technology and engineering skills.

A spokesperson for BAE said that ‘in the short term, the JV will create a credible UK industrial base from which to deliver and support Boxer and other projects, utilising existing capabilities. The JV will also help strengthen UK armoured vehicle capabilities within the wider European context and position the business to participate in various UK and European programmes”.

The combined entity will initially focus on design and manufacture of the British Army’s new Mechanised Infantry Vehicle (MIV) and other strategic combat vehicles programmes such as Boxer, Trojan, Terrier, Warrior, military bridging and the AS90 self-propelled artillery system.

BAE Systems noted that “Artec (the consortium behind Boxer) has committed to 60% of the value of the programme to be delivered in the UK – subject to the JV getting regulatory approval, the bulk of this work would be done in Telford which would lead to job creation”.

Rheinmetall Vehicle Systems Division global head Ben Hudson said: “We are excited about the potential the new Joint Venture holds for Rheinmetall, BAE Systems and ultimately our customers.

“The combined capabilities of our two great companies will offer our customers a comprehensive portfolio of military vehicles and associated technologies both now and into the future.  We are proud to invest in the UK and expect to substantially grow the current business and the Telford manufacturing facility over the coming years.”

In October, BAE Systems unveiled the proposed upgrade of the British Army’s Challenger 2 main battle tank (MBT). BAE Systems is leading a strategic partnership of major defence firms called Team Challenger 2 to bid for the MBT’s Life Extension Project (LEP).

–Additional reporting by Talal Husseini.