Recasts after analyst call

MILAN, Feb 7 (Reuters) - Italy's Iveco IVG.MI is considering spinning off its defence unit this year to simplify the group's structure and create greater flexibility for both businesses, it said on Friday.

The announcement sent shares of the Italian truck and bus maker up nearly 18% with investors saying a separation would also ease any M&A deal involving Iveco itself, the smallest of Europe's leading truckmakers.

"Without a strategic defence business, it would definitely be easier to find a buyer (for Iveco), with a smaller risk of triggering government opposition," said Fabio Caldato, a portfolio manager at AcomeA SGR, which holds Iveco shares.

Turin-based Iveco is controlled by Exor EXOR.AS, the holding company of Italy's Agnelli family which holds a 27.1% stake and 42.6% of voting rights.

Iveco's Milan-listed shares pared gains but were still 17.1% higher by 1250 GMT at 13.60 euros, outperforming a flat market.

CEO Olof Persson said a spin-off appeared "the simple way of achieving the benefits of separation".

"There is no change of ownership at the point of separation, there is less market risk and maybe a good share (of investors) wish to remain invested in both companies," he told analysts.

Iveco's IDV defence division has been growing amid a global military spending push and could benefit from a new wave of expected M&A activity.

Media have reported potential interest from Italy's state-controlled defence group Leonardo LDOF.MI, with which IDV already cooperates, including within a joint-venture with Germany's Rheinmetall RHMG.DE for combat ground vehicles.

IDV posted a 10% operating profit margin last year, the only double-digit result from Iveco's industrial businesses.

A spin-off would also include the ASTRA quarry truck brand and related activities, the company said, adding it would provide an update in coming months.

MODEST GROWTH

Iveco forecast adjusted earnings before interest and tax $(EBIT)$ from industrial activities of between 850 million and 900 million euros ($882-$934 million) in 2025, versus a broadly unchanged 851 million euro result in 2024.

Persson said the group's guidance for 2025 reflected expectations for lower truck business in the first half and a recovery in the second.

Iveco, which proposed a 0.33 euro per share dividend, also launched a 130 million euro share buyback programme to replace one of the same amount, of which only 60 million euros was returned.

($1 = 0.9639 euros)

(Reporting by Giulio Piovaccari; Editing by Giulia Segreti, Emelia Sithole-Matarise, Jane Merriman, Kirsten Donovan)

((giulio.piovaccari@thomsonreuters.com))