One of Italy’s leading defence primes, Leonardo, has raised its stake in GEM Elettronica, a manufacturer of critical maritime systems, from 30% to 65%.

This decision was announced in Rome on 23 September 2024, when Leonardo finalised the acquisition of control in the company for €16m ($17.8m).

With revenue exceeding €30m in 2023, GEM develops and produces navigation systems, situational awareness, radar sensors, optronic and inertial sensors used in naval domain and coastal surveillance settings.

Brief history between the companies

Leonardo had initially placed a 30% stake in the supplier, based on the Eastern coast of Italy along the Adriatic Sea, in April 2021. The move was made to strengthen Leonardo’s position in the naval sector, particularly in the field of short and medium-range sensors.

As part of the original agreement, Leonardo was able to increase its stake in GEM’s capital share and acquire control of the company via a purchase option to be exercised in 2024.

Prior to this deal, GEM acted as a supplier to Leonardo for years on numerous projects, including collbaorations on the FREMM programme and the Italian Navy fleet modernisation programme.

Europe's defence industry ambitions

Leonardo introduced a four-year ‘Industrial Plan’ in March this year that aims to increase organic growth through digitalisation, improve efficiency through changes to product and portfolio for group-wide savings and, finally, cultivating international alliances and inorganic growth.

The decision to acquire control of GEM fits into the latter driver, as the company says it will “play a proactive role in the evolution of the European Defence industry.”

Europe also reoriented a month after Leonardo’s new Industrial Plan when the European Commission and the European Defence Agency unveiled their inaugural defence industrial strategy. This is a new legislative initiative that will bridge the short-term emergency measures, adopted in 2023 and ending in 2025, to a more structural and longer-term approach to achieve defence industrial readiness.

This EU strategy will ensure that ensure that, by 2030, the value of intra-EU defence trade represents at least 35% of the value of the EU defence market.

Leonardo’s consolidation of GEM will support this new European industrial footing by enhancing its supply chain resilience as it leverages the company’s 40 years of experience in the naval sector.