Leonardo to Buy 25% Stake in Hensoldt for About $733 Million

Leonardo SpA agreed to buy a 25.1% stake in Hensoldt AG from a KKR-controlled investment vehicle for 606 million euros ($733 million) to beef up the Italian aerospace company’s defense electronics business and seek a broader role in the European defense industry.

Leonardo is buying the stake from Square Lux Holding II, the KKR-controlled entity, for about 23 euros a share, the Italian company said in a statement. The deal makes state-backed Leonardo the largest shareholder of the German defense company along with government-backed Kreditanstalt Fuer Wiederaufbau, which agreed in March to acquire a 25.1% stake. Square Lux will still hold 18% after the sale.

The deal could strengthen Italian and German defense ties and allow Leonardo to play a more active role in European defense cooperation. The two companies have already worked together on the Eurofighter Typhoon project, and the tie-up could help them challenge the influence of French defense companies like Dassault Aviation and Thales.

Italian Defense Minister Lorenzo Guerini said in a tweet after announcement that the “excellent operation conducted by the Italian company moves in the direction of European cooperation” in the defense sector.

Earlier in the week, Hensoldt confirmed that Lux Holding was in advanced talks to sell part of the Hensoldt stake to companies including Indra, Saab and Thales, as well as Leonardo.

Leonardo expects the deal to close in the second half, contingent on regulatory approval in Germany. UBS and Detusche Bank advised Leonardo.

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