German tank manufacturer Krauss-Maffei Wegmann (KMW) has signed an agreement with French armoured vehicle maker, Nexter Systems to establish a joint holding company.
The merger creates a European defence technology group employing more than 6,000 people, with a current annual turnover of nearly €2bn and order book of approximately €6.5bn.
KMW and Nexter signed agreement to establish the joint venture, which will be named Kant, in July 2014.
In a joint statement, the companies said that the strategic alignment enables jobs and skills to be retained in the heart of the European Union, and marks a decisive step for the consolidation of the European defence technology industry.
The statement read: "In addition, it offers to its European and Nato customers the opportunity of increased standardisation and interoperability for their defence equipment, with a dependable industrial base."
French state controlled company GIAT Industries and Wegmann, owners of Nexter and KMW respectively, will take a 50% holding each in the combined group, which will be headquartered in the Netherlands.
KMW CEO Frank Haun was quoted by Reuters as saying that the new company will have operating bases in Germany and France.
Considering Germany's tough arms controls, Haun also urged the German and French governments to agree to joint export rules for the new entity.
Haun said: "You can't say 'the German army is not buying anything, you're not allowed to export anything, but you have to keep jobs here.' It's irrational."
While developing a consolidation project, the new entity is likely to maintain the balance between the two operational companies and will also protect their related technologies, know-how and competences, in full compliance with the export regulations.
Subject to legal and customary regulation approvals, the merger is expected to be completed by the end of this year.
Image: Leopard 1 main battle tank is among the platforms produced by KMW. Photo: courtesy of Balcer.