Armament | Rheinmetall acquires the naval division of the Lürssen Group

It's a deal that's massively changing the German defense industry: The Düsseldorf-based Rheinmetall Group is now entering the naval business, taking over the entire naval division of the Bremen-based Lürssen Group. This includes Blohm + Voss and the Norderwerft shipyard in Hamburg, the Peene shipyard in Wolgast, and the Neue Jadewerft shipyard in Wilhelmshaven. It also has locations in Bulgaria, Croatia, Egypt, and Brunei. The takeover affects approximately 2,000 employees worldwide, as Lürssen announced overnight into Monday. Both parties have agreed not to disclose the purchase price. The takeover is subject to antitrust approval. Rheinmetall and Lürssen hope to close the deal early next year.

Germany's shipbuilding industry has long been dominated by two groups: Thyssen-Krupp Marine Systems (TKMS) in Kiel, the capital of Schleswig-Holstein, known for its submarines , and Lürssen. The family-run group, headquartered in Bremen-Vegesack, was founded in 1875 and is a northern German shipyard group with around 4,100 employees worldwide. The civil division of the group operates under the name Lürssen and specializes in the construction and repair of mega yachts. Since 2021, the marine division has been managed as an independent company within the group under the umbrella brand NVL (Naval Vessels Lürssen).

Last year, NVL generated sales of approximately one billion euros. Its order books are well filled. According to media reports, NVL currently has orders worth approximately seven billion euros. The company supplies both the German Navy and other armed forces. Lürssen sees additional potential in the future in the field of autonomous shipping – i.e., floating drones.

With the sale, Lürssen aims to send a "sign of strength," as the company puts it. At the same time, it is paving the way for the long-desired merger of the German defense industry. "Especially in light of the heightened threat situation, we consider consolidation within the defense industry necessary and sensible," says Managing Partner Friedrich Lürssen. "This is the only way to ensure our country's rapid defense capability."

In recent years, the complexity of command and weapon systems has increased massively. Warships are being networked with other units and supplemented by autonomous units in the air, on the water, and underwater. According to Lürßen, this requires "a more extensive integration of such weapon systems than before." The acquisition creates "a nucleus for a new, fast-growing naval division" at Rheinmetall. Further acquisitions are therefore not out of the question.

For decades, Rheinmetall, originally an automotive supplier, has made a name for itself worldwide as a provider, particularly in military technology. With the acquisition of the shipbuilder, the company aims to broaden its position. According to CEO Armin Papperger, this is a further step toward achieving its "ambitious medium-term goals for sustainable, profitable growth."

The group, with approximately 40,000 employees and revenue of €10 billion in 2024, already does business with the Navy, for example, as a supplier of naval guns and laser modules. Since the beginning of the war in Ukraine in February 2022, the company's share price has increased twentyfold. Rheinmetall is one of the most important suppliers to the attacked country, and this arms aid is partially paid for by the German government.

With this new strategic acquisition, Rheinmetall is expanding its position as a leading provider of defense technology in Germany and Europe. "In the future, we will be a relevant player on land, at sea, in the air, and in space," says CEO Papperger. "Rheinmetall is thus developing into a cross-domain systems provider." In combination with Rheinmetall's expertise, a vital German powerhouse for state-of-the-art surface vessels will be created – "a powerhouse," Pappberger is convinced.

The deal, however, is unlikely to be met with enthusiasm across the industry. There are efforts to upgrade the German-French tank manufacturer KNDS along the lines of Airbus in order to contain Rheinmetall's now precarious size.

Meanwhile, many questions remain unanswered for employees and employee representatives. "For example, the industrial policy concept and the concrete planned synergies that Rheinmetall is talking about are missing," says Daniel Friedrich, district manager of IG Metall Coast. The union representative calls on both companies to ensure transparency as quickly as possible and to alleviate uncertainty for employees at the northern German sites: "Without site and employment security, as well as sound collective bargaining agreements, a new structure under Rheinmetall will not work."