Italian aerospace firm Leonardo has agreed to buy a 25.1% stake in Germany-based defence technology company Hensoldt.
The transaction has been agreed for a cash purchase price of around €606m ($733m).
The agreement has been signed with Square Lux Holding II, a portfolio company controlled by funds advised by KKR.
If the transaction is executed, Leonardo will become Hensoldt’s largest shareholder, alongside Kreditanstalt für Wiederaufbau (KfW).
Last month, KfW, which is 80% owned by the Federal Republic of Germany, agreed to purchase a 25.1% stake in Hensoldt.
Leonardo CEO Alessandro Profumo said: “We are excited about the investment in Hensoldt as the catalyst for establishing closer cooperation to enhance our respective positions in the growing defence electronics market.
“This investment also reflects our long-held view on the importance of building cooperation across the European aerospace and defence industry, and demonstrates our determination to play an active role in this development.”
The transaction is expected to close in the second half of this year, subject to regulatory approvals in Germany and a selected number of countries.
It is also subject to other customary closing conditions.
UBS and Deutsche Bank served respectively as lead financial adviser and financial adviser to Leonardo while Clifford Chance has been appointed as legal adviser to Leonardo.
Hensoldt CEO Thomas Müller said: “With this transaction, we will have a second long-term anchor shareholder in our company and a strong potential strategic partner, with whom we are already successfully working together on a number of programmes.
“As a leading provider of sensor solutions for defence and security applications, we see multiple opportunities for working with Leonardo to further support our successful strategy and strengthen Hensoldt’s long-term growth.”
Earlier this year, Leonardo won a contract to supply its Type 163 Laser Target Designator (LTD) for the Slovenian Armed Forces (SAF).