France’s state-owned Naval Group and Italy’s Fincantieri have signed a 50-50 joint venture that will allow them to pursue military procurement contracts worth €5 billion to that would see the bi-national company build 10-15 warships over the next decade.

The agreement signed by Fincantieri’s Giuseppe Bono and Naval’s Hervé Guillou, two companies that have until now been fiercely competing with each other for procurement contracts worldwide will be based in Italy and include a French subsidiary as well as an evenly split six-person board.

Fincantieri and Naval are currently cooperating on the acquisition by the French Navy of four Logistic Support Ships derived from the Italian Navy’s new Vulcano design, which is set to enter into operation in 2020. The two companies will also try to secure a contract for the construction of Horizon-class frigates with a jointly-developed Combat Management System, the computer system that connects a naval ship’s sensors, weapons, data links, support measures and other equipment to the officers and staff performing tasks during live-fire operations.

The two groups came to an initial understanding for a full merger in September 2017 that was supposed to include commercial shipbuilding. The agreement fell through, however, just as French President Emmanuel Macron and then-Italian Prime Minister Paolo Gentiloni were in the process of discussing the creation of a shipbuilding firm that would act as a so-called “Airbus of the Seas” which would begin with Fincantieri’s takeover of the France STX shipyard.

The European Commission raised serious objections to the deal that were not too dissimilar to the scuttled Alstom-Siemens merger of earlier this year. But unlike the Siemens-Alstom deal, which was blocked over competition concerns, the French government did not move to defend the deal. Worries have emerged, however, about the potential for worsening political relations between Italy and France due to the respective political trajectory that their two governments have carved out in the last 24 months with Paris championing a pan-Europeanist/globalist worldview and Italy’s anti-establishment government favouring more sovereigntist, or nationally independent, policies.