(Alliance News) - Negotiations between Leonardo Spa and the French-German KNDS group, which had been trying for six months to finalize an alliance for the production of tanks and armored infantry vehicles, as envisaged in the letter of intent signed last Dec. 13, have broken down.

On Tuesday afternoon, KNDS, through a statement by CEO, Frank Haun, announced the halt to negotiations, which was later confirmed by Leonardo.

The goal of the alliance was mainly Leonardo's participation in the production of future Leopard 2A8 tanks, currently produced by KNDS subsidiaries-notably Germany's Krauss-Maffei Wegmann and France's Nexter, which produces Leclerc tanks-to be offered in the tender called by the Italian Army to replace Oto Melara's old Ariete tanks. An order potentially worth 8 billion euros.

Leonardo had asked to be allowed to produce the turret with Oto Melara and some electronic components and targeting systems, to "Italianize" the Leopard. A 50-50 split of the value of the order between Germany and Italy had been assumed.

However, KNDS did not want to change the configuration of the Leopard, keeping the turret production at Kmw and limiting itself to offering more marginal components. This was the main reason for the breakup.

The second chapter of the non-cooperation with KNDS would have involved the new infantry armored vehicle (Aifv), for another Army tender to replace the old Darts. In total, the two orders would be worth between EUR15 billion and EUR20 billion, spread over at least a decade.

The third chapter of the assumed alliance would have included Leonardo's participation in the construction of the future European heavy tank, the "Main battle tank" or "Main ground combat system." Leonardo would have had a minority role in a project promoted by France and Germany.

According to Il Sole 24 Ore, Leonardo is already considering alternative options, with the most concrete one represented by a partnership with German giant Rheinmetall, which has long been interested in the army's rich orders. Rheinmetall produces the Panther tank and the Lynx light armored vehicle.

Leonardo's stock is down 2.4 percent at EUR22.75 per share.


By Giuseppe Fabio Ciccomascolo, Alliance News senior reporter

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