The Bundeskartellamt has today cleared the acquisition of shares in RENK Group AG, Augsburg, by KNDS N.V., Amsterdam, Netherlands. KNDS intends to increase its stake in RENK to 25 per cent plus one vote.

RENK mainly operates in the defence industry, specialising in the sale of transmissions and suspension systems for military vehicles and corresponding after-sales products and services. RENK components are used in numerous military vehicles of the Bundeswehr, but also in vehicles of other NATO countries, for example in vehicles of the US armed forces. RENK has a strong position in the market for the manufacture of transmissions for military vehicles in Germany, particularly when it comes to transmissions for tracked vehicles such as tanks. Unlike other military vehicles, tracked vehicles require transmissions which not only transmit power from the engine to the running gear but also have a brake and steering function.

KNDS is a Franco-German arms manufacturer formed by a merger between Krauss-Maffei Wegmann and the French defence firm Nexter. The French state has a stake in KNDS.

Andreas Mundt, President of the Bundeskartellamt: “KNDS and RENK operate at different market levels. We examined in more detail whether the acquisition of shares may lead to disadvantages for other system integrators which also source transmissions and other components from RENK. However, our findings suggest that this is not to be expected as it would not be economically viable for RENK to stop supplying other customers.”

It should also be considered that KNDS will not acquire control of, but only a minority stake in RENK, meaning it will not have decisive influence on RENK’s strategic commercial behaviour.

As a military vehicle system integrator, including for the Leopard 2 main battle tank, KNDS sources transmissions from RENK. Other system integrators also depend on RENK transmissions, especially for their tracked military vehicles. Against this background, the Bundeskartellamt examined whether, in the event of supply shortages, RENK may prioritise its shareholder KNDS when supplying transmissions and suspension systems. As part of its investigations, the Bundeskartellamt therefore spoke to various market participants and, in particular, surveyed other customers of RENK.

It found that RENK is not likely to foreclose other customers as this would not be economically viable for RENK considering the current market structure and how the market is expected to develop in the coming years. RENK’s production capacity significantly exceeds KNDS’s demand for transmissions and suspension systems. Customer foreclosure is also unlikely due to the many cooperation projects in the defence industry where KNDS, among others, works together with other defence companies.

Lastly, the governments requesting military vehicles considerably influence how the market develops. Before going into production, military vehicle systems are developed and tested over a period of several years, during which the governments requesting these systems can make many different specifications, considerably influencing the choice of individual components and thus of individual suppliers for the total system.

With regard to after-sales products and services, there are other suppliers in addition to RENK also offering these products and services for transmissions and suspension systems.