Leonardo’s tank raid may prelude bigger charge
31/07/2025 10:29
The author is a Reuters Breakingviews columnist. The opinions expressed are his own. By Pierre Briancon BERLIN, July 31 (Reuters Breakingviews) - Italy is growing a domestic tank champion. Leonardo’s LDOF.MI 1.7 billion euro acquisition of the defence business of Iveco IVG.MI, the Agnelli-controlled truck maker, shows the state-backed Italian group eager to take a larger share of the booming European armoured vehicle sector. It will also help the company run by Roberto Cingolani forge closer ties with Rheinmetall RHMG.DE, the 80 billion euro German weapons and ammunition maker. Leonardo can now expect to play a major role if the European tank market consolidates. Exor, the Agnelli family's holding company, was keen to sell Iveco, which it listed in early 2022, because it is no longer part of the core businesses the family wants to focus on, such as cars, luxury and healthcare. But it first had to spin off Iveco’s defence business IDV, which accounts for 15% of the company’s revenue but nearly 40% of its operating profit, because Rome wanted to keep the unit in Italian hands. The IDV deal will be closed in early 2026 before the 3.8 billion euro sale of Iveco’s main truck business to India’s Tata Motors TAMO.NS can be completed. The Italian government’s nationalist preferences put Leonardo, which is also 30% owned by Rome, in a strong negotiating position. It is buying IDV for 1.7 billion euros including debt, or 13 times trailing EBITDA - by all metrics a lowball offer in the European defence sector. The unit could have been worth 2.5 billion or 3 billion euros if based on multiples similar to France’s Safran SAF.PA or Germany’s Hensoldt HAGG.DE. IDV’s valuation is also dragged down by a relatively low-tech military trucks unit - which Leonardo will sell to Rheinmetall at a later stage. But Leonardo’s winning bid was still lower than a 2 billion euro offer from Franco-German tank maker KNDS, according to Bloomberg, suggesting it got a bargain. The Italian group can now concentrate on developing IDV’s armoured vehicle business. That will also help its existing collaboration with Rheinmetall, which started after it ended talks last year with KNDS, to develop tanks for the Italian army. That illustrates how the European defence industry has started to consolidate through joint ventures and cross-border co-operation, under the watchful eye of the bloc’s national governments. KNDS is for example the driving force behind the “tank of the future” project launched by France and Germany - but Rheinmetall is involved, as well as other European defence players. There’s still scope for much more radical consolidation. European armies currently operate 19 different sorts of battle tanks - against only one in the U.S. Meshing together the armoured vehicle businesses of players such as Rheinmetall, KNDS, Hensoldt and Renk R3NK.DE could help rationalise production and create an Airbus AIR.PA of armoured vehicles. Leonardo has at least ensured that it will count as a serious player in the next stage of a deeper much-needed restructuring. Follow Pierre Briancon on Bluesky and LinkedIn. CONTEXT NEWS Iveco, the truck maker controlled by Italy’s Agnelli family, said on July 30 that it had agreed to sell its IDV defence unit to Leonardo, giving the business an enterprise value of 1.7 billion euros. The deal is to be completed in early 2026 paves the way for India's Tata Motors to buy Iveco’s main business in a deal valued at 3.8 billion euros ($4.36 billion), the companies said on July 30. Leonardo is buying a business more profitable than its own https://www.reuters.com/graphics/BRV-BRV/jnpwbambevw/chart.png (Editing by Neil Unmack; Production by Streisand Neto) ((For previous columns by the author, Reuters customers can click on BRIANCON/pierre.briancon@thomsonreuters.com))