Tank maker KNDS vows to guard against political meddling as it readies IPO
Avoiding power struggles between France and Germany is seen to be key to the success of the group
The head of Franco-German tank maker KNDS has pledged that the group will have a corporate governance structure that will protect it from political interference as it pushes ahead with a market listing.
The company, which makes the best-selling Leopard 2 tank as well as munitions, is owned equally by the French government and several German families. The families are in the process of negotiating a sale to the German government alongside a planned IPO this summer, which, if finalised, is expected to leave both Berlin and Paris with a 40 per cent stake.
Avoiding power struggles between the two countries once they are co-owners will be key to the success of the group as Europe seeks to bolster defence co-operation in the face of Russian aggression.
Jean-Paul Alary, chief executive, said getting the “right governance” for KNDS was a “key element” for the “value” of its future shareholders.
“I will pay a lot of attention to make sure that [there will be] market-ready governance,” Alary told the FT, adding that it was critical that he had the “tools and the means” to develop the company according to its strategy.
The threat of state interference has loomed over KNDS’s proposed listing amid strained relations between France and Germany due to a dispute on a joint fighter jet project.
Under the plan, Berlin would take a 40 per cent stake in KNDS while Paris will reduce its existing 50 per cent stake to the same level, with a view to cutting these over time.
Alary declined to comment on what valuation KNDS was targeting but the FT has previously reported the group hoped to achieve a market capitalisation of €15bn to €20bn. The CEO said talks with potential investors were going well despite the backdrop of falling defence valuations in recent weeks.
While his priority remained the IPO, Alary did not rule out deals, including a possible tie-up with ammunition maker Czechoslovak Group, which has made an offer to the German families to buy their stake.
“We can have a discussion with CSG in the future, why not . . . But it’s not on the agenda of today,” said Alary.
KNDS on Tuesday reported a 32 per cent jump in operating profit to €661mn, with sales rising 16 per cent to €4.4bn. KNDS said it had an order backlog of €33.1bn.
The company also said on Tuesday that a probe by law firm Freshfields launched last month into bribery allegations related to a 2013 deal with Qatar’s armed forces was “sufficiently complete” to finalise the audit of its 2025 financial statements.
The results underlined rapid growth in Germany as the country has dramatically stepped up defence spending in response to the war in Ukraine. It plans to spend €780bn between now and the end of 2030.
The ammunition unit grew the fastest to rise 24.7 per cent to reach €612mn year on year.
Given the increase in German spending, a revenue and growth imbalance exists between the French and German units. Revenue at the German land systems segment grew 17 per cent to €2.5bn last year, almost double the €1.3bn at the French equivalent, which grew at almost 10 per cent.
Alary said there was a “much stronger acceleration” in Germany given its shift after years of under-investment. He added that more capital investment and jobs would flow to Germany to fulfil the order book.
KNDS was created in a merger between France’s Nexter and Germany’s Krauss-Maffei Wegmann in 2015 when France and Germany were eager to share costs following years of under-investment following the end of the cold war. But the two sides continued to operate separately and have rarely developed products together.
Alary played down the suggestion that faster German growth and revenue would stoke tensions. Given that national armies are the only customers of defence groups, industrial co-operation can be difficult because of the expectation that work will be distributed fairly and disagreements over manufacturing, timing and specifications of weapons.
KNDS was also growing capacity in France, Alary added, insisting that his job was to forge a single entity that would be pan-European.
“Growth is everywhere . . . we have one group, we have one strategy and we have to deliver this strategy.”
Referring to investors’ views in pre-IPO meetings, Alary said: “The story regarding the pan-European model of KNDS [is] very appealing so far.
“I also expect additional capacity and capability outside France and Germany,” he added, so as to serve other countries.