Diehl Defense of Germany is selling its operations for the manufacture of tracks and tank suspensions to Krauss-Maffei Wegmann.
Diehl Defense Land System's tank portfolio includes maintenance, repair and upgrading of tanks, with the German Army counted as a major customer.
New innovations include light-weight tracks for the German infantry combat vehicle, the Puma, and segmented rubber band tracks.
"With the transfer of its vehicle business, Diehl is contributing to the consolidation of the German land systems industry," the companies said in a joint announcement. "The company will increasingly focus on its core business comprising guided weapons, intelligent ammunition as well as impact and protection.
"For KMW, the acquisition adds a strategic range of products and services to the existing portfolio."
The financial terms of the transaction were not disclosed, but the companies said the deal is "subject to approval by the antitrust authorities."
KMW is the manufacturer of Germany's Leopard main battle tank, armored vehicles and artillery systems.
