German parliament approves €7.2 billion stake in tank maker KNDS ahead of July IPO

Budget committee approval

The German parliament's budget committee voted on Friday to authorise an off-budget expenditure of up to €7.2 billion ($8.21 billion) for a 40% stake in KNDS, the maker of Leopard 2 and Boxer tanks. The decision, taken in a closed session, allows the federal government to acquire the shares from the German founding families via state development bank KfW before the planned initial public offering.

Strategic rationale

The investment is designed to give Berlin equal footing with the French state, which will reduce its holding from 50% to 40% as part of the transaction. Both governments have agreed not to cut their stakes below 30% for ten years without mutual consent. The move is intended to secure joint control over a company seen as central to Europe's defence industrial base and to safeguard sensitive technologies and jobs.

“It's about jobs in Germany. It's about securing this know-how for Germany in the long term.”

Company background and IPO

KNDS was formed from the merger of Germany's Krauss-Maffei Wegmann and France's Nexter. It supplies more than 40 armies worldwide, employs around 11,000 people, and reported revenue of €4.4 billion last year, a 15.9% increase. The group, headquartered in Amsterdam, plans to list shares in Frankfurt and Paris before the parliamentary summer break, in what is billed as one of Europe's most significant defence flotations.

Valuation and cost

Confidential documents seen by Spiegel show that the purchase price will be determined by a formula based on the IPO issue price plus a customary block premium, with an adjustment for post-IPO share performance. An independent valuation by PwC, commissioned by the economics ministry, put KNDS's enterprise value at between €13.4 billion and €17.4 billion. A final price of €7.2 billion would exceed the upper end of that range, a point likely to draw scrutiny from lawmakers. Annual administration costs for the KfW-held stake are estimated at €350 million.

Political reactions

The vote exposed divisions within the committee. The Greens abstained, warning that the IPO timetable had created a negotiating disadvantage.

“It is fundamentally right for the federal government to participate in strategic technologies, but we have been put in a blackmail situation by the IPO to some extent, so there are risks in many areas.”

SPD budget spokesman Thorsten Rudolph argued that direct state involvement was unavoidable given KNDS's importance to the Bundeswehr.

“It is imperative that we as the Federal Republic take responsibility for such a central company for the Bundeswehr.”