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Last Updated : May 14, 2020 07:58 AM IST | Source: Reuters

Thyssenkrupp, Fincantieri in talks to form warship champion: Source

Thyssenkrupp is exploring several strategic options for its warship unit, ranging from combining it with Italy's Fincantieri to creating a national champion with German peers


Thyssenkrupp is exploring several strategic options for its warship unit, ranging from combining it with Italy's Fincantieri to creating a national champion with German peers, a person familiar with the matter said.

The talks are aimed at creating economies of scale for the division, Thyssenkrupp Marine Systems (TKMS), which builds submarines and surface ships and operates in a highly fragmented sector driven by political decisions, the source said.

As part of the deliberations, the steel-to-car parts conglomerate is in talks with shipbuilder Fincantieri about a 50-50 joint venture to create a European champion with combined sales of 3.4 billion euros ($3.7 billion), the person said.

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Under that scenario Fincantieri, which also builds cruise ships and is majority-owned by the Italian government, would bring in its defense activities, which the source said accounted for 1.6 billion euros of sales last year.

Thyssenkrupp declined to comment.

Fincantieri declined to comment on concrete talks. A spokesman added: "The consolidation of the European defense industry remains desirable and the long-standing cooperation with Germany's naval industry to build submarines represents a concrete opportunity to talk about future scenarios of consolidation".

Thyssenkrupp is also in early discussions to merge TKMS with smaller German rivals Luerssen and German Naval Yards (GNYK) to create a national powerhouse in a bid to keep critical defense technology in the country and safeguard jobs, the source said.

GERMAN CHAMPION

One option under discussion includes Luerssen buying a stake of just over 50% in GNYK in a first step, with Thyssenkrupp possibly becoming involved at a later stage, two people familiar with the matter said.

Luerssen and GNYK late on Wednesday confirmed that they would merge their defense vessel units into a joint company to be led by family-run Luerssen to increase efficiency and improve their competitiveness.

"We also want to actively contribute to master the challenges in the shipping sector that have been caused by the corona pandemic and to protect jobs and technology in the country over the long term," Friedrich Luerssen of the Luerssen family said.

Daniel Friedrich, who heads IG Metall Kueste, the powerful German union's arm responsible for workers in coastal areas, said national consolidation was the right step to kick off consolidation.

"The subsequent step would be a European idea. We would then have to talk about how we can make it work with global players such as Fincantieri, such as Naval (Group) in France, that not only have European sites but are present globally."

Thyssenkrupp might also decide to keep the division, which generated 1.8 billion euros of sales and 1 million of adjusted operating profit in the last fiscal year, and develop it further on its own, the source said.

Thyssenkrupp late last year said it planned to invest 250 million euros at TKMS by 2023, encouraged by good order intake and adding it would hire 500 new employees by the end of this year.

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First Published on May 14, 2020 07:50 am
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