Iveco to sell defence and truck units in deals worth €5.5bn
Van and truckmaker backed by Agnelli family finalises transactions with Leonardo and Tata Motors
Iveco, the van and truckmaker backed by Italy’s Agnelli family, has agreed to sell its defence unit to Leonardo and its commercial vehicle division to Tata Motors, in two deals totalling €5.5bn.
The sale capped months of negotiations, with several European players interested in Iveco’s defence division at a time when many countries across the continent are increasing their military budgets to address rising geopolitical tensions.
Leonardo, the Italian defence group which has partnered with its German joint venture partner Rheinmetall, emerged as the successful buyer after Rome demanded Iveco’s defence unit be sold to a domestic buyer, according to people familiar with the negotiations.
Leonardo chief executive Roberto Cingolani said in a statement that the €1.7bn deal, including debt, reinforced Leonardo’s position as a key player in the European land defence market.
The sale of the defence division paved the way for Exor, the Agnelli family holding group which also owns stakes in Stellantis and Ferrari, to offload Iveco’s other businesses, including its trucks, buses and industrial power trains units, as it attempts to diversify away from the automotive sector, the people said.
India’s Tata Motors, which owns British carmaker Jaguar Land Rover, is expected to pay around €3.8bn for Iveco’s non-defence business after it takes on Exor’s 27 per cent financial stake in the group.
The combination will give the Indian group the scale to compete against global rivals Daimler Truck and Volkswagen-owned Scania.
The offer price of €14.10 per share represents a premium of up to 41 per cent based on the average price of Iveco shares in the past three months after taking out a special dividend linked to the sale of its defence business.
Iveco sells defence and civil protection vehicles under the IDV brand, and heavy-duty trucks for quarries and mines under the Astra brand — which will both be sold to Leonardo.
“Our colleagues in the defence business will become part of a group with the scale and integrated capabilities to compete on all levels and for all platforms,” said Iveco’s chief executive Olof Persson.
The company’s valuation has more than doubled this year to around €5bn, making it the right time for Exor to consider offloading Iveco to Tata, the people said.
Past attempts to sell Iveco, which employs more than 14,000 in Italy, had failed owing to the strategic nature of its defence vehicle business. Under the so-called golden power rules, the Italian government has veto powers over deals involving assets operating in strategic sectors.
Government officials on Wednesday welcomed the twin deals, which they said would facilitate Iveco’s future growth.
The officials said India is an increasingly important strategic partner for Italy, after the two countries recently signed a deal for closer economic and industrial co-operation.
No loss of jobs in Italy — either in Iveco or among its suppliers — are envisaged as part of the transaction, they said, adding that the government supports “quality foreign investments” and will “closely monitor” the operation.
Tata’s purchase of Iveco’s commercial vehicle division also “represents recognition of the value of Italian technologies”, one of the officials said, noting that the strategy of the new owners would be to “achieve solid international expansion”.
Leonardo last year agreed a joint venture with Rheinmetall to build tanks for the Italian army in a deal that both companies hailed as a step towards consolidating Europe’s fragmented land vehicle industry.
The Italian defence group’s Cingolani has been an outspoken proponent of the need for Europe’s contractors to collaborate in order to boost the region’s sovereign capabilities.
The deal came as Leonardo reported a 9 per cent increase in second-quarter operating profit to €243mn, boosted by an increase in orders for its aircraft and defence electronics divisions.
The company predicted that higher military spending in the EU and individual defence budgets would boost its revenue by €4 to €6bn by the end of 2029.
The company raised its outlook for orders, free cash flow and net debt for the full year. Leonardo said new orders at the end of the year would be between €22.25bn and €22.75bn, up from a previous estimate of €21bn.