KNDS' bid to raise stake in tank gearbox maker Renk faces challenge, sources say

(Reuters) -Franco-German defence contractor KNDS' plan to increase its stake in German tank gearbox maker Renk is facing a potential challenge from the designated seller of the shares, two people familiar with the matter told Reuters on Wednesday.

Tank maker KNDS earlier this year exercised an option to raise its holding in Renk to 25.1% from 6.7% by purchasing shares from private equity group Triton Partners at terms that are now unfavourable for Triton because of a recent surge in Renk's shares.

The Italian government has yet to give its clearance for the transaction, and KNDS and Triton disagree whether failure to win that approval on time would mean the deal falls through.

According to Bloomberg News, which earlier reported on the dispute, a deadline for the transaction to be wrapped up ends next week.

A KNDS spokesperson told Reuters that the company was confident it would win Italy's approval and that, in any case, the share purchase agreement was not contingent on Italy's go-ahead because Renk does not operate a plant in the country.

According to a source familiar with the matter, Triton insists that the deal would fall apart if Italy's clearance doesn't emerge on time.

Triton declined to comment.

Renk shares were down 3.5% at 1455 GMT, erasing gains on Monday and Tuesday.

(Reporting by Alexander Huebner. Writing by Ludwig Burger. Editing by Mark Potter)