Rheinmetall beats BAE to $2.5 billion Australian contract

FRANKFURT (Reuters) - Germany's Rheinmetall (RHMG.DE) beat BAE Systems (BAES.L) to a $2.5 billion (1.79 billion pounds) Australian order for armoured reconnaissance vehicles, which comes on top of an existing major contract with the country for utility vehicles.

The Australian defence ministry will now enter exclusive final negotiations with Rheinmetall, the company said in a statement on Wednesday.

If the contract is finalised, the 211 Boxer vehicles will be built by Australian workers, using Australian steel and will create up to 1,450 jobs, Prime Minister Malcolm Turnbull and the defence ministry said in a separate statement.

Rheinmetall estimated the project size at around A$3.15 billion ($2.5 billion).

Deliveries will likely start in 2019 and run until 2026, safeguarding its business in Australia after its existing A$1.58 billion order for logistical vehicles, won in 2013, runs out at the end of the decade.

Rheinmetall shares were up 3 percent at the top of the MDAX index (.MDAXI) at market open.

(Reporting by Maria Sheahan; editing by Sunil Nair and Jason Neely)