HELSINKI — Leading Nordic defense companies are primed to use consolidation to grow size and better defend regional home markets again international competition.
Mergers and acquisitions are being used as a primary tool by defense groups Terma, Patria, Saab and Kongsberg to expand production capacity and range of competences.
Industry chiefs are responding to re-energized efforts by Nordic governments to deepen the partnership role of the region's defense-industrial complex in supplying military systems and equipment to Nordic militaries.
HELSINKI — Nordic Defence Cooperation (NORDEFCO), the interstate military collaboration vehicle, has been tasked with identifying new avenues to strengthen the connection between industry and military procurements.
The focus is both on promoting pan-Nordic collaboration in the development of weapons systems as well as tendering for joint procurement contracts run by Sweden, Finland, Denmark and Norway.
"A strong regional industrial defense base has a lot to offer Nordic defense," Danish Defence Minister Peter Christensen said. Denmark currently holds the rotating chair in NORDEFCO.
The initiative to deepen industry's role is backed by a defense industry cooperation agreement reached by Nordic governments in March 2015. Dialogue with the defense industry, and the associated Joint Nordic Defence Industry Cooperation Group, is led by NORDEFCO's armaments cooperation unit.
The move toward Nordic defense consolidation was manifest in Kongsberg Defence and Aerospace’s (KDA) acquisition of a 49.9 percent equity stake in the Finnish state-controlled defense group Patria Oyj in March. KDA paid US $321 million for the shareholding. The Finnish state retains a 50.1 percent ownership in Patria.
The deal underlines that real cooperation in the Nordic industrial sphere is possible, according to Heikki Allonen, CEO of Patria. Combined, KDA and Patria will have revenues of around $1.64 billion.
"The partnership of Patria and Kongsberg creates a significant industrial force within the Nordic defense sector," Allonen said.
In recent months, Nordic consolidation-focused acquisition deals have seen Patria purchase a 25 percent strategic equity stake in Finnish cybersecurity firm Silverskin Information Security Oy.
Elsewhere, Nammo Lapua acquired Patria's artillery and mortar components' production facility in Sastamala, Finland.
Danish aerospace and defense group Terma, which is forecasting revenues of around $230 million in 2016, is also in an acquisitive mood. The company's financial outlook is buoyed by the prospect of potentially lucrative spinoff subcontracts connected to Denmark's acquisition of 27 F-35 Lightning II aircraft.
"We may need to make some additional investments in time. We will then look at what companies and new expertise we may want to bring into the group to ensure our continued growth," said Jens Maaløe, Terma's CEO.