Berlin plans 40% stake in Franco-German defence group KNDS

The German government has decided to acquire a stake in the Franco-German defence group KNDS following months of internal deliberations, a government source told dpa.

According to the source, Berlin plans to purchase an initial 40% stake in KNDS, the manufacturer of Leopard 2 battle tanks and Panzerhaubitze 2000 artillery systems. The government is expected to reduce its holding to 30% within two to three years.

KNDS was formed through the merger of Germany’s Krauss-Maffei Wegmann and France’s Nexter. The company is currently jointly owned by the German family behind Krauss-Maffei Wegmann and the French state. Media reports have valued KNDS at approximately €20 billion ($23.3 billion) ahead of a planned initial public offering.

As part of the planned restructuring of ownership, Germany is also seeking a reduction in France’s current 50% stake, if possible. Berlin aims to secure guarantees that both Germany and France will retain equal decision-making rights on key issues, including production site decisions, even after the German state reduces its stake to 30%.

The purchase price for the German stake will be determined based on the initial public offering price at which shares are sold to private and institutional investors. The source emphasised that Germany does not intend to pay a premium. Oversight of the investment will fall under the German Economy Ministry.

The idea of state participation in KNDS was first raised by Defence Minister Boris Pistorius last year, as part of a broader strategy to increase government involvement in Germany’s defence industry.

“We need state shareholdings, I am firmly convinced of that, also to ensure that know-how and jobs remain in Germany,” Pistorius told the German business daily Handelsblatt in October. He added that the government was also examining the possibility of a stake in shipbuilder TKMS.

By Tamilla Hasanova