Rheinmetall AG is set to buy a US military vehicle specialist for US$950 million as the German company seeks to expand its position in the world’s largest defence market.

The acquisition of Loc Performance Products LLC, which makes track systems for tanks and agricultural vehicles as well as hulls for combat platforms, will boost Rheinmetall’s production capacity in the US, the company said late on Tuesday. The US market for army vehicle programmes has a total potential of over US$60 billion of orders, it said. 

The American market is a strategic priority for Rheinmetall. The maker of the Leopard tanks and ammunition said in June it will expand its collaboration with Lockheed Martin Corp, the world’s largest defence company. Joint developments already include a rocket launcher able to cover a distance of some 400km (249 miles).  

The deal with Loc will add about 1,000 skilled workers, the company said, while the transaction is subject to regulatory approvals. Rheinmetall’s shares rose as much as 2% Wednesday in Frankfurt trading, adding to the stock more than doubling over the past year to €24.3 billion .

"Rheinmetall seeks greater US manufacturing presence through its US$950 million acquisition of Loc Performance to better compete against General Dynamics on the XM30 program [valued at over US$60 billion] and Mack Defense, Navistar Defense and Oshkosh Defense on the Common Tactical Truck program (about US$16 billion). Loc is a defence supplier with content on existing Army combat vehicles," said Bloomberg Intelligence industry analyst Will Lee.

Rheinmetall is among a number of European weapons contractors that has seen sales surge to records amid the growing threat from Russia. Earlier this month, chief executive officer Armin Papperger said revenue is set to rise by about €2 billion annually after investments in additional capacity and acquisitions since Russia’s annexation of Crimea in 2014. For this year, revenue is expected to rise to around €10 billion.

The company is also expanding its presence in Europe. Rheinmetall and Leonardo SpA last month said they’ll work together on developing a new main battle tank and platform for an armoured infantry combat vehicle to the Italian Army. 

  - Bloomberg