Global bidders line up for Renault Trucks Defense

PARIS – Safran, an aeronautics equipment and defense company, is among European and American firms and investment funds that have considered bidding for Renault Trucks Defense, accordingto multiple defense sources.

“Safran is studying it,” a defense source said. “Everybody is looking at the dossier.”

CMI, a Belgian builder of turrets and guns for armored vehicles; Rheinmetall; and three venture capital companies are among those which have also taken a look at RTD, the source said.

“Safran has always been on the list” of firms taking a close look at RTD, a second defense executive said.

There was talk of Safran's interest a couple of weeks before Volvo issued a Nov. 4 statement on a planned sale of RTD. Other companies included BAE Systems, General Dynamics, Leonardo, Patria-Kongsberg and Rheinmetall.

Leonardo was not interested in bidding, a source in Italy said.
RTD is a key company in the Volvo group's government sales unit, or VGGS, which the Swedish truck maker plans to sell off once staff consultations have been held. Other firms in VGGS include Acmat, U.S. truck-builder Mack, and Panhard, one of the oldest names in French motor industry.

Volvo has retained Rothschild as its bank adviser, two sources said.

The industrial logic behind Safran’s interest lay in an equipment company acquiring a vehicle builder, and selling its own kit to equip the platform, the first source said. An indicator is the partnership between Safran and Panhard to build Wasp, a light 7.62mm remote weapon system for armored vehicles.

Advent, Cinven and HIG are among investment funds which have looked at RTD, the source said.

Safran in September picked Advent for exclusive talks to spin off its identity and security business, formerly known as Morpho. Last month, the equipment maker who built the Felin infantry system made an agreed offer for Zodiac Aerospace, a specialist in airliner seats, so management teams are heavily occupied.

CMI is keen to bid for RTD, but the French Ministry of Defence previously issued a veto, as the government's preferred pick is KNDS, the Franco-German joint venture between Krauss-Maffei Wegmann and Nexter, La Tribune website reported Feb. 6.

The Belgian firm is a “very logical” candidate, one which makes industrial sense, said a third defense source. CMI supplies cannons and turrets to General Dynamics Canada on a multibillion-dollar Saudi contract. A merger of CMI and RTD would create a European group of “very respectable size”.

Among CMI board members is Gérard Longuet, a former French defense minister, Belga News reported in 2014.

CMI has a French industrial presence with a factory in Distroff, northeast France, and an office just outside Paris, the third source said. Four to five months ago, Belgium told France the Belgian authorities want to buy Jaguar combat vehicles and Griffon troop carriers under the French Army’s Scorpion program, with the Belgian versions fitted with CMI turrets and guns and other locally sourced kit.

The French MoD has resisted against accepting bids from investment companies, sources said. But the Ministry for the Economy and Finance is keen on venture capital firms, as that boosts the pricing.
General Dynamics is seen as a candidate, as the company has a strong European presence, having won a $600 million Danish contract last year with its Piranha 5 troop carrier and bidding in a U.K. tender for its mechanized infantry vehicle program.

BAE Systems, General Dynamics, Rheinmetall and Safran declined comment.

Nexter, the French state-owned land weapons company, has been seen as the natural bidder for RTD, all the more so as Defence Minister Jean-Yves Le Drian has said the government is keeping a close eye on the sale and seeks to protect the national interest.

France may have a say, but Volvo is steered by market economics and will look for the highest bidder, a French political source said.

KNDS is interested in making a bid for RTD, a KMW spokesman said.

A Nexter spokesperson said: “KNDS is interested in acquiring RTD. It is consistent with the KNDS strategy.

“KNDS is an actor in the consolidation of European land defense. The sale of RTD by Volvo is an opportunity.”

On the political front, the French MoD is watching the clock as a presidential election looms in May, followed by a parliamentary poll in June. That puts pressure on the ministry to reach an agreement, but Volvo will want to take its time to find a buyer, sources said.

The MoD declined comment.

In a few months, there will be a new president and ministers at defense, industry and economy, so it is far from certain that Nexter will win RTD, the third source said.

The price for RTD is likely to be between €500-700 million (U.S. $533-747 million), or the equivalent of one year’s worth of sales, the first source said. Sales for this year are forecast at €600-€700 million, buoyed by a Canadian order won through Mack, and contracts for the French special forces, Kuwait, and Saudi Arabia to arm Lebanon.

The acquisition price is usually eight to nine times operating profit, or one year’s worth of sales, the source said. The order book is worth €4-5 billion, offering six to seven years’ work.

RTD had 2015 sales of €500 million.

The ideal buyer for RTD would be a defense rather than a civil company, with a complementarity of products, a second industry executive said. For Volvo, it would be one which pays the most.

RTD draws on its own funds to develop vehicles for the export market, which accounts for half of annual sales. There is fierce competition in exports from firms in Turkey, China, India, South Africa and Russia. There are also European and American competitors, and the European market is fragmented, as almost each country has a domestic producer.

Lars Hoffmann from Göttingen, Germany, Tom Kington from Rome, and Jen Judson from Washington contributed to this report.

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