Deutz to acquire FFG for 1.6 billion euros, accelerates defence push

By Emanuele Berro

July 9 (Reuters) - German engine manufacturer Deutz said on Thursday it had agreed to acquire military vehicle maker FFG Flensburger Fahrzeugbau Gesellschaft for 1.6 billion euros ($1.83 billion), deepening its push into the defence sector as European military spending rises.

The company said the transaction is expected to bring its 2030 strategic targets of 4 billion euros in revenue and a 10% margin on earnings before interest and tax within reach ahead of schedule.

Chief Executive Sebastian Schulte told Reuters he expected the targets to be reached one to two years earlier.

Shares in Deutz were up around 2.8% by 1212 GMT, having earlier risen by as much as 10.2%.

Upon completion of the transaction, expected no later than 2027, the families that currently own FFG will become major shareholders in Deutz with a stake of up to 29.9%, the company said.

FFG, based in Flensburg in northern Germany, manufactures military support and armoured vehicles, including the WiSENT armoured recovery vehicle and ACSV G5 tracked combat-support vehicle used by NATO customers.

The vehicle maker will form the new core of Deutz's defence business unit, while remaining operationally independent, Deutz added. 

Trade union IG Metall called on both companies to safeguard jobs and demanded that FFG workers be brought back under the metal and electrical industries' collective agreement, which it said offered better conditions than the automotive-sector pact.

($1 = 0.8744 euros)

(Reporting by Emanuele Berro and Tom Kaechenhoff; Editing by Linda Pasquini, Jan Harvey and Matt Scuffham)