ROME — Germany’s Rheinmetall will make an offer to take a minority stake in Italian cannon maker Oto Melara within a month, a source acquainted with the operation has told Defense News.

If accepted, the deal would see off reported interest in Oto Melara from KNDS – the alliance of Germany’s Krauss-Maffei Wegmann and France’s Nexter which sounded out Oto Melara’s owner, Italian state controlled Leonardo, about a sale last year.

Leonardo has been keen to sell part or all of the firm, considering it non-core as it focuses on electronics, helicopters, aircraft and cyber technology.

Oto Melara produces turrets for fighting vehicles and naval cannons which have been purchased by navies around the world. It also teams with Italian firm Iveco to build wheeled fighting vehicles.

Rheinmetall’s wish to take a minority stake, rather than the 100 percent purchase reportedly proposed by KNDS, has garnered favor with Italian politicians concerned about ceding the firm to a foreign buyer just as the Ukraine war ups the value of armored vehicle know-how.

If the operation goes ahead and Rheinmetall takes a stake in the firm, it would offer to build in Italy its Lynx vehicle to fulfill the Italian army’s requirement for a new light tracked fighting vehicle, the source said.

The new vehicle would replace Italy’s ageing Dardo vehicles. Oto Melara is currently valued at 500 million to 600 million euros ($536-$644 million), but its value is expected to grow if and when it obtains work on the new vehicle.

Last year’s Italian defense spending document predicted the new vehicle program would cost 2.14 billion euros ($2.29 billion) spread over 14 years.

The turret of the Italian Lynx could be supplied by Oto Melara and the communications by Leonardo, said the source, who could not be named because he was unauthorized to speak to the media.

Through its Italian unit Rheinmetall Italia, the German firm already operates six facilities in Italy and employs 2,500.

KNDS and Italy’s state-controlled shipyard Fincantieri may now also make offers to take stakes in Oto Melara.

A 2021 defense budget document stated that the Italian government is keen on developing its new tracked fighting vehicle in a “multi-national context, based on alliances between solid European entities that already collaborate with Italian firms.”

Such a deal would help prepare the ground for Italy’s involvement in the fledgling European plan for a common main battle tank, the document said.

Both KNDS and Rheinmetall are already part of the program, known as the Main Ground Combat System.

Tom Kington is the Italy correspondent for Defense News.

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