Spanish antitrust officials have launched infringement proceedings against Rheinmetall, the German arms manufacturer, accusing the company of providing incomplete and misleading information during its acquisition of Spanish munitions manufacturer Expal Systems.
The National Markets and Competition Commission (CNMC) announced on Monday that it is investigating whether the deal had an impact on various markets, including the production and marketing of nitrocellulose and nitroglycerin, reported Wall Street Journal.
Rheinmetall is alleged to have omitted crucial information regarding these markets when notifying the transaction to the CNMC. In a statement, the CNMC mentioned that some of the information provided by Rheinmetall may have been misleading. If these allegations are proven true, the German company could face fines of up to 5% of its sales from the year before the potential fine is imposed.
The acquisition deal in question took place in November 2022 when Rheinmetall agreed to purchase Expal Systems for 1.2 billion euros ($1.29 billion). This move was driven by Rheinmetall’s desire to meet the escalating demand for ammunition following Russia’s invasion of Ukraine. The CNMC initially cleared the acquisition in February 2023, and Rheinmetall finalized the deal during the summer months. At that time, Rheinmetall anticipated that the new subsidiary, Expal Systems, would contribute more than EUR190 million to the company’s sales in 2023.
However, the CNMC’s current investigation raises questions about the transparency and accuracy of the information provided by Rheinmetall during the acquisition process. The alleged omissions related to the production and marketing of nitrocellulose and nitroglycerin suggest a potential violation of competition regulations.
If found guilty, Rheinmetall could face significant financial penalties. The CNMC has the authority to impose fines of up to 5% of Rheinmetall’s sales from the year preceding the potential fine. This development adds a layer of uncertainty to Rheinmetall’s financial outlook, especially as the company is scheduled to report its 2023 figures on March 14.
Rheinmetall has not yet responded publicly to the allegations, and it remains to be seen how this investigation will impact the company’s standing in the arms manufacturing industry and its future business operations in Spain. The outcome of the CNMC’s probe could have broader implications for corporate transparency and compliance in cross-border acquisitions within the European Union.