Iveco to break up with sale of company to Tata, Leonardo

Iveco Group NV agreed to break itself up, selling its defense unit to Leonardo SpA and the rest of the Italian truck maker to Tata Motors Ltd in deals totaling about €5.5 billion ($6.3 billion).

Leonardo will pay €1.7 billion including debt for the military vehicle business, according to a statement Wednesday. The rest of Turin-based Iveco, which makes a range of commercial trucks and buses, is set to be acquired by Tata for about €3.8 billion.

Acquiring Iveco’s truck operations would give Tata a toehold in Europe’s commercial-vehicle industry, boosting the Indian firm’s presence in a major market nearly two decades after purchasing Jaguar Land Rover in 2008. Tata also gains design and technology capabilities in areas like sustainable transport that can help its appeal with European buyers.

The billionaire Agnelli family’s Exor NV holding company, which controls Iveco, has agreed to sell its 27% financial stake to Tata, according to the statement. Tata will bid for the remaining shares in a deal aimed at delisting the Italian company.

Iveco shareholders are set to receive €14.10 per share from the Tata portion of the breakup, plus an extraordinary dividend estimated to be between €5.50 and €6 per share from the Leonardo transaction, according to the statements.

That would bring net proceeds to Iveco investors as high as €20.10 per share, compared with a closing price Wednesday of €19.01 in Milan.

Iveco stock has more than doubled this year amid rising valuations for defense assets. The company said Tuesday that it was in advanced discussions on a two-part deal to sell itself, confirming earlier reporting by Bloomberg.

The company employs about 36,000 people, mainly in Europe, with just under 40% of its work force in Italy, according to its annual report. It also has manufacturing in France, Germany, the UK, China and Latin America.

Trucks and buses made up the bulk of the company’s €15.3 billion in 2024 revenue, while defense accounted for less than 10%. The company also has a significant powertrain division.

For Leonardo, gaining Iveco’s military vehicles helps the larger Italian firm consolidate its position in the European land defense sector, it said. The sale to Leonardo, which faced pressure from rival suitors, keeps the defense operations in local hands, satisfying a key demand of the Italian government.

Tata in Europe

Tata’s move comes as the Indian automaker undergoes a demerger to separate its commercial and passenger-vehicle businesses by March.

Iveco will help the largely India-focused commercial vehicle division expand its overseas footprint, just as the $2.3 billion JLR acquisition elevated Tata’s status in the global luxury car segment.

Tata Motors shares fell 3.5% in Mumbai on Wednesday prior to the announcemments, highlighting investor concerns around the acquisition and pushing this year’s decline to more than 10%.

Iveco’s defense unit, headquartered in Bolzano, operates manufacturing plants in Germany, Romania and Brazil, employing about 2,000 people.

Consolidation is taking hold as European military budgets rise, due to Russia’s invasion of Ukraine and pressure from the US for NATO partners to raise defense spending.

These developments have increased prospects for target companies like Iveco, and led Italy’s government to pressure Leonardo into raising its offer. The government is broadly supportive of the breakup plan, Bloomberg reported on Wednesday.

On a call with analysts, Leonardo Chief Executive Officer Roberto Cingolani said the company and Rheinmetall AG plan discuss how to share Iveco’s defense activities, with a goal of reaching an agreement by year-end. The two companies are already working on tank-making collaboration.

In selling Iveco, Fiat’s founding Agnelli family is retreating from a business that it launched in 1903, when the Italian automaker rolled out its first commercial vehicle.

Several Fiat truck brands were brought together under the Iveco banner in 1975, and the business became a standalone public company in 2022 after splitting from agricultural equipment maker CNH Industrial.

In recent years, Exor has sold out of some automotive businesses, including machinery specialist Comau and auto-parts maker Magneti Marelli. At the same time, it’s invested in Royal Philips NV, French bag and shoe maker Christian Louboutin and the global healthcare business of France’s Merieux family.

After selling part of its Ferrari stake this year, Exor earmarked about €2 billion to invest in a US or European company, Bloomberg reported in June.

— By Alberto Brambilla and Alisha Sachdev (Bloomberg)