Rheinmetall agrees EUR 1.2bn takeover of Expal Systems
By Josh White
Date: Monday 14 Nov 2022
(Sharecast News) - Germany-based military equipment maker Rheinmetall agreed to buy the Spanish ammunition and explosives producer Expal Systems, it announced on Sunday, for €1.2bn (£1.05bn).
The company said the acquisition would see its ammunition, propellants and weapons business - core to Rheinmetall - expand.
It said the deal was expected to complete next year, following competition and regulatory clearance, with some serious scrutiny of the combination likely to result from European regulators and market participants.
Lawmakers in Madrid implemented a new process in 2020 for the purchase of more than 10% of companies strategic to the country, which Expal would fall under given it supplies the Spanish Armed Forces.
Expal, which counts more than 1,000 staff and 11 production facilities, was expecting sales of about €400m in 2021.
"Because the product spectrums of the two companies complement each other so well, the acquisition substantially augments Rheinmetall's existing range of products, especially in the fast-growing market for artillery and mortar ammunition as well as mortar systems," the Rheinmetall board said in its announcement.
"The buyout also adds to Rheinmetall's portfolio in the field of fuses and rocket propulsion systems, for example, as well as in medium-calibre ammunition and aircraft armament, while simultaneously reducing the group's dependence on suppliers for some industrial intermediates and ammunition components."
In important areas such as purchasing and sales, it said synergies would have a positive impact on costs, which would also benefit customers.
"Thanks to this acquisition, Rheinmetall is gaining a valuable strategic foothold in Spain, and thus direct access to this important market.
"Rheinmetall sees maintaining the company's existing technology and staff as essential; all operational locations - Trubia, Burgos, Navalmoral, El Gordo, Albacete and Murcia in Spain as well as Texarkana, Texas in the United States - are therefore to remain open."
Expal Systems is currently a subsidiary of the Madrid-based Maxam Explosives - formerly Unión Explosivos Río Tinto - which is owned by private equity outfit Rhone Capital, Reuters said.
Reporting by Josh White for Sharecast.com.
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