The Franco-German consortium is conducting due diligence on the two units that Italian defence group Leonardo has put on the block and could submit its offer by the end of the year or early 2022, the sources familiar with the matter said.
KNDS is pitted against Italian shipbuilder Fincantieri, which expressed an interest in the units but has not started formal due diligence and has put forward a less generous proposal so far, the sources said.
The Italian government, which controls both Leonardo and Fincantieri, is determined to have the final say on the deal.
As Europe pushes for closer cooperation on defence, Rome wants to keep open the door for cooperation between domestic and foreign groups, political sources have said, but also wants to protect jobs and growth at home.
As part of its proposal, KNDS has offered to include Italy in the Main Ground Combat System (MGCS) tank project, an option that would give Leonardo the possibility of offering its sensors and electronics for the new tank.
OTO Melara, which makes naval and terrestrial cannons, would also fit into KNDS's portfolio and strengthen its hand in a 2.2 billion euro contract that the Italian army is due to launch in the near future.
ELIMINATING A COMPETITOR
Italian metalworker unions FIOM and UILM said they had called a one-day strike at some Leonardo plants on Dec. 6 and will organise a rally in Rome on the same day against the sale of the two units to foreign groups.
"Foreign buyers, who specialise exclusively in the terrestrial field, have an interest in acquiring OTO Melara and Wass with the aim of eliminating a competitor ahead of the launch of a new contract for the Italian army," the unions said in a flyer distributed to workers at an OTO Melara plant in the Italian city of La Spezia.
The sale could result in the splitting up of the two divisions' land, naval, underwater and munitions' businesses, in a move that could put at risk some of the 1,500 jobs at the units, FIOM and UILM said.
OTO Melara is currently a tank supplier to the Italian army together with Iveco Defence Vehicles, while Wass produces torpedoes.
Fincantieri, which started informal talks with Leonardo over OTO Melara and Wass before KNDS' approach, could decide to join forces with other groups, the sources said.
($1 = 0.8836 euros)
(Additional reporting by Christina Amann in Berlin; Writing by Francesca LandiniEditing by Mark Potter and Susan Fenton)
By Angelo Amante, Francesca Landini and Elisa Anzolin