Rheinmetall aims for major US military orders with Loc Performance deal worth $950 million

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Rheinmetall has agreed to take over US military vehicle parts manufacturer Loc Performance in a deal worth $950 million, while Germany’s largest arms company is eyeing billion-dollar contracts with the world’s largest army.

The Düsseldorf-based company said the deal would expand its business with the U.S. military and help it handle “large-scale, large-scale orders for U.S. Army vehicle programs” worth potentially more than $60 billion. Michigan-based Loc makes parts such as track systems and road wheels for combat vehicles.

Rheinmetall has been one of the biggest beneficiaries of German defense spending since the start of the Ukraine war. The group’s share price has increased about sixfold since 2022. The company is now trying to secure a larger share of the highly consolidated US defense market.

Armin Papperger, CEO of Rheinmetall, said the USA would be “an important core market for us in the coming years” and added: “Everything speaks in favor of this acquisition.”

Rheinmetall, along with Michigan-based General Dynamics Land Systems, is the only company still in the running to develop the XM30 combat vehicle. The US military has ordered the vehicle to replace the M2 Bradley infantry fighting vehicle. The contract is said to be worth $45 billion and includes 4,000 vehicles.

The company said it was also applying for the US Army’s Common Tactical Truck program, with the winner standing to win a contract worth around $16 billion for 40,000 trucks.

Matthew Warnick, managing director of American Rheinmetall Vehicles – part of Rheinmetall’s US subsidiary – said the company has a “promising position” in the XM30 and CTT projects. “The acquisition of Loc Performance gives us the production readiness that will enable us to realize the large orders we are targeting,” he said.

The deal comes after investment firm MNC Capital raised its offer for Vista Outdoor, a U.S. maker of ammunition and outdoor products, to around $3.2 billion last month. The higher bid came just hours after privately held Czechoslovak Group cleared the final regulatory hurdle in its bid to acquire Vista’s Kinetic ammunition business for $2 billion.

To comply with U.S. regulations for contractors supplying the military, Maine-based American Rheinmetall has its own board of directors and its own chief executive officer: Brad Hittle, who has worked with the company’s U.S. arm since 2008. The company must also develop unique intellectual property for the U.S. Army.

Loc Performance was founded in 1971 in Plymouth, Michigan, and has since expanded to a total of four production sites in Michigan and Ohio. The vehicle specialist, which manufactures drive trains, suspension and track systems as well as rubber and armor products, employs around 1,000 people. Rheinmetall said the purchase price for Loc was based on an enterprise value of $950 million.

The company said last week it had amassed a record order backlog of €48.6 billion as sales and profits continued to rise sharply amid escalating wars in Ukraine and Gaza.