The planned dual listing of defence group KNDS in Frankfurt and Paris has seen its expected market capitalisation shrink by as much as a quarter, as a political stand-off between Berlin and Paris over state veto rights clouds the offering. Investors who valued the company at up to €25bn just months ago are now looking at a range of €18bn to €20bn. Germany and France each intend to take a 40% stake via the KfW and the French state respectively, leaving only a 20% free float — an unusually thin slice for a group of this scale. Analysts have demanded a valuation discount, arguing that minority shareholders will have scant influence. Berlin is internally split over whether to commit to the full 40% or scale back to 30%, and if no agreement is reached in time, management may proceed without German state participation.
One obstacle has been removed, however. An internal and external compliance probe into a 2013 contract for Leopard 2 tanks and PzH-2000 howitzers to Qatar concluded on 2 June without finding any evidence of wrongdoing. That clearance allows KNDS to finalise its audited 2025 accounts and publish the IPO prospectus, targeting a capital raise of roughly €5bn — equivalent to a quarter of its equity. The company also streamlined its portfolio in late May, selling 5.8% of its stake in RENK via an accelerated bookbuilding process managed by Deutsche Bank and Goldman Sachs, netting around €262m. It retains a remaining 10% holding, locked up until November.
Operationally, the company is on solid ground. Revenue rose 15.9% last year to €4.4bn, operating profit climbed to €661m, and the order book swelled from €23.5bn to €33.1bn. European NATO allies increased defence spending by 20% in 2025, and at the Hague summit they committed to allocating 5% of GDP to defence and security by 2035. A recent £1bn order from the British Army for 72 RCH-155 howitzers — to be delivered from 2028 and produced at Stockport and Telford via a joint venture with Rheinmetall — underscores the demand.
Should investors sell immediately? Or is it worth buying KNDS?
The biggest near-term catalyst may come from Washington. In July, the US Army is set to decide on a prototype contract for up to 500 self-propelled howitzers, with series production potentially starting in 2028. KNDS, together with partner Leonardo DRS, is competing against a heavyweight field that includes Rheinmetall, BAE Systems Bofors, Hanwha Defense USA, General Dynamics and Elbit Systems. The offering relies on heavy, well-armoured wheeled vehicles fitted with the German AGM turret module. A win during the subscription period could dramatically boost demand for the shares; without it, management must rely purely on operating numbers to attract investors.
The final price tag hinges on Berlin’s resolution of the ownership structure. Chairman Tom Enders has called for a long-term withdrawal of states from the capital, with both Germany and France planning to reduce their stakes to 30% within three years. But with the French presidential election campaign due to begin in the autumn, Paris is pushing for a swift listing. KNDS insists it remains on schedule for the dual debut in Frankfurt and Paris, but the narrow window for error is shrinking. The order book is impressive; it is the governance architecture that will ultimately decide at what valuation the defence group goes public.
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