Italy's government granted conditional approval to a 50-50 joint venture between state-controlled defense group Leonardo and Turkey's Baykar to produce unmanned aerial vehicles. The deal, first announced in March 2025, targets a UAV market worth about $100 billion over the next decade. Sales will be limited to NATO-aligned countries under the terms of Italy's golden power review.
Italy's government granted conditional approval to a 50-50 joint venture between state-controlled defense group Leonardo and Turkey's Baykar to produce unmanned aerial vehicles. The deal, first announced in March 2025, targets a UAV market worth about $100 billion over the next decade. Sales will be limited to NATO-aligned countries under the terms of Italy's golden power review.
Italy approved a Leonardo-Baykar drone joint venture valued at $100 billion over 10 years, with conditions restricting sales to NATO-aligned countries and classifying all technology used in the aircraft.
"The partnership addresses Europe's structural weakness in drone manufacturing by combining Leonardo's systems integration with Baykar's proven platform," a person familiar with the matter said, asking not to be named because the details are private.
The 50-50 venture received clearance at a cabinet meeting Tuesday under Italy's golden power rules, which allow the government to impose conditions or block foreign acquisitions in strategic sectors. Baykar, one of the world's largest drone exporters known for its Bayraktar TB2, gains access to the European market through the deal, while Leonardo secures a foothold in the fast-growing UAV segment at a time when European defense spending is rising.
The companies see a drone market worth roughly $100 billion over the next 10 years, reflecting surging demand for unmanned systems from militaries worldwide. The Ukraine war has demonstrated the battlefield effectiveness of drones, accelerating procurement programs across Europe.
Under the conditions imposed by the government, sales of the drones and any international expansion of the venture will be limited to countries politically aligned with Europe and NATO. All technology used in the drones will be classified, the source said. The government's conditions effectively prevent the venture from selling to non-aligned nations, including China and Russia.
The agreement was first reported by Italian daily Il Messaggero. Leonardo, which had 65,455 employees at the end of 2025 and operates 131 production sites globally, is one of Europe's leading aerospace and defense groups. The company's shares trade on the Borsa Italiana under the ticker LDO and have an average analyst price target of 68.67 euros, implying about 33 percent upside from the last close of 51.70 euros.
The approval marks a milestone in defense industrial cooperation between two NATO allies, Italy and Turkey, at a time when European nations are seeking to bolster their military capabilities. The venture also intensifies competition in the drone manufacturing space, where European players have historically lagged behind U.S., Israeli and Turkish producers. Leonardo's existing helicopter and electronics businesses could provide integration capabilities for the new venture, while Baykar brings combat-proven drone technology that has been exported to more than 30 countries.
This article is for informational purposes only and does not constitute investment advice.
