Saab Buys ThyssenKrupp’s Swedish Marine Unit for $50 Million

Jun 30, 2014 3:47 am ET

(Updates with share reaction in fourth paragraph.)

June 30 (Bloomberg) -- Saab AB agreed to buy the Swedish marine defense unit of ThyssenKrupp AG for 340 million kronor ($50 million), expanding the maker of Gripen jet fighters’ business to manufacturing submarines and stealth corvettes.

“An important task is to achieve synergies with Saab’s existing marine activities,” the Stockholm-based company said in a statement yesterday. “This work must take its course while starting delivery of development, maintenance and products to the Swedish market.”

The takeover is the result of a long-standing disagreement between Essen, Germany-based ThyssenKrupp and Sweden’s defense materials agency, FMV. After Saab recruited engineers from ThyssenKrupp’s Swedish shipyard, the German steelmaker agreed to begin negotiating a sale of the unit, formerly known as Kockums, in April. The unit has generated substantial losses for years, ThyssenKrupp said in a separate statement.

Earlier this month, Sweden’s government and the main opposition party agreed to work to secure continued production of submarines and warships in Sweden and to promote Saab’s purchase of the unit from ThyssenKrupp to return the shipyard in Karlskrona to Swedish hands. Saab share rose as much as 3.7 percent in the Swedish capital and traded 2.4 percent higher at 208.50 kronor as of 9:08 a.m. local time.

Lacking Capability

In April, Sweden proposed buying more jets and submarines to expand its Baltic Sea capabilities amid an increase in geopolitical tensions after Russia annexed parts of Ukraine. The scramble to upgrade comes after a report this year showed Sweden, which isn’t a member of the North Atlantic Treaty Organization, lacks the capability to defend itself for more than a week after two decades of shrinking defense spending, calculated as a proportion of gross domestic product.

Saab’s new marine unit got its first business on June 9, when it signed a letter of intent with FMV on contracts worth a total of about 11.7 billion kronor for two new submarines and upgrades of two vessels currently in service. On the international submarine market, the Saab-built A26 will compete with ships from ThyssenKrupp’s HDW, which makes the Type 214 diesel-electric sub.