The group has agreed to acquire Naval Vessels Luerssen (NVL), the military division of ship makers Luerssen Group, based in the northern German port city of Bremen.

It marks a major expansion into naval defence for Rheinmetall, already a key supplier of equipment, from armoured vehicles to ammunition, including to Ukraine as it fights off Russia's three-year invasion.

European countries have been racing to build up their militaries since Russia's 2022 invasion of Ukraine.

The drive has been given added impetus by US President Donald Trump's calls for the continent to pay more for its own defence and his questioning of the transatlantic alliance.

"Rheinmetall is expanding its portfolio to include naval shipbuilding," said the Duesseldorf-based group in a statement late Sunday, pointing to the "massive increase in demand from naval forces and rising procurement budgets".

"Against the backdrop of the heightened threat situation in particular, we consider consolidation within the defence industry to be necessary and sensible," added Luerssen's managing partner Friedrich Luerssen in a statement.

Rheinmetall, whose shares were up 2.4 percent in Frankfurt on news of the deal, said the goal was for the transaction to close in early 2026, subject to regulatory approval.

Neither sides disclosed the price.

NVL has four shipyards in northern Germany and also has sites around the world.

The firm, which traces its history back about 150 years, employs around 2,100 people globally. It has built around 1,000 ships and delivered them to navies and coastguards around the world.

The Luerssen Group will now focus solely on building civilian mega-yachts.

Rheinmetall opened Europe's largest munitions factory last month, with the site in northern Germany capable of producing 350,00 artillery shells a year by 2027.

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