Rheinmetall, Europe’s largest supplier of ammunition and tank guns, has announced plans to expand into warship production by acquiring the military division of German shipbuilder Lürssen Group.

The two companies have reached an agreement on the key terms for the acquisition of Naval Vessels Lürssen (NVL), with a completion target set for early 2026, pending antitrust approval. The specific purchase price has not been disclosed.

Rheinmetall, primarily known for land systems and ground-based weapons, has been diversifying its offerings to include drones, missiles, and components for the F-35. This strategic move aims to take advantage of heightened defense spending across Europe. The acquisition of NVL will contribute approximately €1 billion (US$1.2 billion) in annual sales in the naval sector, complementing Rheinmetall’s projected revenue of €9.75 billion for 2024.

In a statement, Rheinmetall expressed that this acquisition would enhance its presence in naval shipbuilding and solidify its position as a leading supplier of defense technology in Germany and Europe. NVL operates four shipyards in northern Germany, employs around 2,100 staff, and is noted for its pioneering work in autonomous maritime surface systems.

Additionally, in August, Lürssen announced a joint venture with Kraken Technology to increase production of unmanned surface vessels.

Rheinmetall previously provided equipment to naval forces, including simulation and protection systems. The company intends to address the growing demand from naval forces through high-performance solutions that encompass vessels, electronics, sensors, and effectors. The acquisition is also anticipated to produce synergy effects with Rheinmetall’s vehicle systems division, minimizing the need for significant infrastructure investments or extensive modifications to existing production lines.

Historically, NVL has constructed the F125 Baden-Württemberg class frigates for the German Navy and is a subcontractor for the new F126 frigates, with the first vessel delivery expected in 2028. It has also built corvettes for both the German and Bulgarian navies, and further construction includes two oilers and three intelligence-gathering vessels for the German forces.

The Lürssen Group has a revenue mix that is evenly split between yacht building and defense. CEO Peter Lürssen noted in a 2021 interview that the yard has constructed vessels such as the 180-meter superyacht Azzam and the 123-meter yacht Dilbar.

Rudy Ruitenberg serves as a Europe correspondent for Defense News and brings experience from his previous tenure at Bloomberg News, covering technology, commodity markets, and politics.