PARIS ― The two bidders in a tender for Renault Trucks Defense took a static view, leading to valuations seen as so low that Swedish truck-maker Volvo took the French company off the market, said RTD chairman Emmanuel Levacher.
Rather than viewing a “dynamic film,” the rival bidders had snapped a “static” photograph, an approach that failed to factor in RTD’s growth potential through new programs, projects and export prospects, Levacher said. The resulting gap between the offers and Volvo’s valuation was “irreconcilable,” he added.
Volvo canceled the competition for the Volvo Group Governmental Sales division, as the Swedish company does not lack cash and is not a “forced seller,” he said.
RTD is the key unit in VGGS, for which a competition was canceled last month.
CMI of Belgium and KNDS, a joint venture of Krauss-Maffei Wegmann and Nexter, had submitted bids of about €400 million (U.S. $463 million), while Volvo and its bank adviser Rothschild had expected €500 million to €700 million
In that tender, the French Armed Forces Ministry made it clear that non-European bids were unwelcome, effectively closing the door on General Dynamics. The company has a significant European presence, with activities in Britain, Germany, Spain and Switzerland.
A defense analyst expects Volvo eventually to put VGGS back on the market. “This is just a rain check,” the analyst said, adding that parent company Volvo is not in a hurry because its unit is profitable.
Now that the competition has been canceled, VGGS is conducting a strategic review to form a standalone business based on French brands Acmat, Panhard and RTD, while separating the Mack Defense and civil trucks business.
RTD expects 2017 sales of €450 million, with a steady double-digit profit. Total VGGS sales are also expected to be stable at some €550 million. Exports, including deals in Canada, Africa and the Middle East, account for some 40 percent of sales.
The French Army’s €6 billion Scorpion modernization program accounts for 30-40 percent of RTD’s sales, stemming from a 30 percent share of the two new armored vehicles, Griffon and Jaguar. The company supplies Volvo engines, gearbox and transmission, 12.7mm and 7.62mm remote weapon stations, and spares.
Nexter is the design authority on the Jaguar combat reconnaissance vehicle and Griffon multirole troop carrier, which will be assembled at its Roanne plant, central France. Thales supplies the on-board electronics.
RTD has the capacity to double output on Griffon and Jaguar, producing 200 of the former from 2020, and 40 to 50 of the latter from 2022. But increased production requires a boost in the Scorpion budget, which competes with other programs. The industrial partners would need six months’ notice to increase production.
Belgium has signed a letter of intent for a planned €1 billion order for the Jaguar and Griffon, with first delivery in 2025. That timetable indicates the Belgian deal was of slim importance in the five-year business plans submitted by the bidders for VGGS.
The French industrial partners are in talks with Belgium for an order expected to be signed in the summer of 2018. An offset for local industry is part of the deal.
Bidders for VGGS may have factored in RTD’s win of the Light VBMR contract in their valuation, but if RTD were to win that deal, there would be development and first deliveries of a four-wheel drive vehicle around 2021 or 2022.
That places the prospective deal in a minor position in a five-year business plan and on the long-term horizon.
An order for RTD would be a strategic victory, as the light vehicle is at the heart of the business. A selection is expected by the end of the year.
RTD earlier this year delivered a first batch of 25 heavy vehicles for the French special forces, but they require fine-tuning because they failed to receive certification. A certification, which states the equipment meets the terms and conditions, could still take some months.
Those 25 are a first batch of 202 heavy vehicles, with RTD also supplying 241 light vehicles to the special forces.
