Thyssenkrupp floats submarine business as defence stocks surge
German conglomerate spins off minority stake in marine division as it pushes ahead with restructuring
Thyssenkrupp will list its submarine manufacturing business in Frankfurt on Monday as it pushes ahead with a restructuring process and seizes upon the surge in defence stocks.
The German company will spin off a minority stake in Thyssenkrupp Marine Systems (TKMS), distributing shares to its shareholders in a ratio of 20 to one.
Thyssenkrupp will retain a 51 per cent stake in the business considered one of the crown jewels of a conglomerate whose activities span auto parts, electrolysers and steel.
The industrial giant is in the middle of a difficult restructuring process that involves selling non-core assets and separating or spinning-off its five core divisions, including its struggling steel business.
Sash Tusa, an analyst for research group Agency Partners, said it was a good time to float a maritime business, with spending on defence soaring since Russia’s full-scale attack on Ukraine.
TKMS, which analysts value at about €3bn, makes warships and naval electronics systems as well as submarines, and owns Germany’s largest shipyard in the port of Kiel.
“Share prices in European defence are up six times since February 2022,” Tusa said, referring to the date of Russia’s invasion.
The decision to float TKMS comes a year after US investment group Carlyle pulled out of talks to acquire a majority interest in the company. Berlin was uneasy about an American private equity group taking a leading stake in a company viewed as critical for Germany’s national security.
In the wake of that decision, Thyssenkrupp saw a spin-off as “the best solution for all stakeholders on the way to independence,” said Deutsche Bank managing director Christof Mürb, who worked on the process.
The German government has expressed interest in taking a stake in Thyssenkrupp’s submarine arm. Defence minister Boris Pistorius said this month that he was exploring deals involving both TKMS and the Franco-German tank maker KNDS, which is considering its own share offering.
“I am firmly convinced that we need state participation — also to ensure that expertise and jobs are retained in Germany,” he told business daily Handelsblatt. “The questions are how large a state stake could be and how quickly an investment could be made.”
TKMS’s order book has surged, spurred the Ukraine crisis and efforts by US President Donald Trump to make Europe shoulder more of the burden within Nato. Its €18.6bn backlog includes an order for four submarines from the German navy.
It is also competing for two critical contracts, one to build submarines for Canada, where it is competing against South Korea’s Hanwha Ocean, and one in Poland, where it is among six contenders vying for the tender.
Benjamin Heelan, analyst at Bank of America, said there was “significant momentum building” in the marine defence sector.
“While defence expenditure over the past 2-3 years has largely focused on land-based capabilities, Europe is now undergoing a strategic shift — recognising the need for hard power at sea. Many of Europe’s surface ships are ageing, prompting a wave of new orders.”
But analysts cautioned that the naval business was notoriously complex and risk-prone, often plagued by delays and cost increases.
The TKMS spin-off comes after tank and artillery giant Rheinmetall last month announced that it would buy the Bremen-based Naval Vessels Lürssen in a bid to create a “naval powerhouse” — a move that could shake up the German maritime sector.
“I’m not sure I want to be very overweight in TKMS if Rheinmetall is entering the market,” said Tusa, the Agency Partners analyst. “Rheinmetall buying NVL is essentially a market share grab in Germany: that means they’re out to eat TKMS’s lunch.”