Armaments: Why Rheinmetall is now also building ships
Germany's dominant defense company also aims to play a leading role on the water: Rheinmetall is acquiring the military division of the Lürssen Group, including four shipyards in northern Germany that build frigates and corvettes, among other products. "In the future, we will be a relevant player on land, at sea, in the air, and in space," said Rheinmetall CEO Armin Papperger. "We are creating a naval powerhouse in Germany."
His company is primarily known for armored vehicles and ammunition, but is pushing hard into other areas of the defense industry. Rheinmetall generated sales of just under €10 billion last year, but aims to reach €40 to €50 billion by 2030. The Düsseldorf-based company is experiencing an unprecedented boom in the industry thanks to its arms buildup – as is its share price: By mid-afternoon on Wednesday, the price had risen by a good 2 percent to a record high of more than €1,900.
Papperger wants to create a systems house that networks various weapon systems. "With this acquisition, we will become more than just a producer of floating platforms," Papperger said. "As an integrated naval powerhouse, we want to offer complete system solutions." Rheinmetall has around one billion euros available each year for acquisitions to "fill the gaps in its offerings."
Naval Vessels Lürssen (NVL) is expected to be slightly above this mark, but the price was not disclosed. The company generated one billion euros in revenue last year, is said to be above-average profitable compared to the industry average, and employs approximately 2,100 people. Its main locations are Blohm+Voss and the Norderweft shipyard in Hamburg, the Neue Jadewerft shipyard in Wilhelmshaven, and the Peene shipyard in Wolgast. It also has branches in Croatia, Bulgaria, Egypt, Singapore, and Brunei.
This makes NVL the second-largest German naval shipyard, behind the twice-larger TKMS in Kiel, a subsidiary of the Thyssenkrupp Group known primarily for submarines. German Naval Yards, also based in Kiel, is considered the third largest shipyard in the group. Speculation has revolved around these companies for years, as a consolidation of naval shipyards in Germany, and in Europe as a whole, is considered long overdue.
For example, Peter Lürßen, co-owner of the Lürssen Group, advocated for partnerships and mergers two years ago – although he had his eye on TKMS rather than Rheinmetall. Papperger, in turn, toyed with the idea of acquiring a stake in TKMS. However, its CEO, Oliver Burkhard, has his own growth plans and is currently preparing an IPO that is intended to largely decouple TKMS from the struggling Thyssenkrupp Group.
Rheinmetall's move has now set things in motion. Further steps could follow, as Papperger has ambitious goals for NVL. Revenue from the expected €1.3 billion this year is expected to reach at least €5 billion by 2030. The operating profit margin is expected to rise from 10 to over 15 percent. NVL would then earn at least €750 million before interest and taxes (EBIT).
Growing demand in Germany is expected to be a key driver, as the Navy has a significant backlog of ships. Rheinmetall also expects its global presence to improve its prospects for international contracts. Finally, the company sees great potential in the ships for its weapon systems, sensors, radars, and communications solutions, some of which are already being delivered to the shipyards. A side effect for Rheinmetall: The shipyards, with their heavy equipment, are also suitable for work on armored vehicles.
Lürssen will now focus on its specialty, the construction of luxury yachts. Some of the world's largest yachts come from the 150-year-old family business, including the 180-meter-long "Azzam," owned by the ruling family of Abu Dhabi. Four years ago, Lürssen completely separated its yacht and marine divisions, and just at the beginning of this year, Lürssen acquired the Nobiskrug shipyard in Rendsburg and added it to its yacht division.
"The discussions of the past few weeks have shown that the chemistry between our companies is good and that we share similar values," said co-owner Peter Lürßen. The family business has also apparently reached its limits in the warship business. The construction of five corvettes for the German Navy has been massively delayed. They were scheduled for delivery in 2022, but so far only the first two have even completed sea trials.
Industry experts also consider the division of labor between NVL's locations less than optimal. They expect Papperger to make some changes within the company once Rheinmetall takes over at NVL, likely in early 2026.
The union therefore views the takeover with mixed feelings. "Many questions remain unanswered," said Daniel Friedrich, coastal district manager of IG Metall. While no jobs are at acute risk thanks to the strong order situation, Rheinmetall must provide guarantees and conclude collective bargaining agreements. So far, there is no clarity regarding the industrial policy concept and planned synergies.
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