Tankmaker KNDS to decide on IPO within months, Germany could take stake, CEO says

By Sabine Siebold

AMSTERDAM (Reuters) -Franco-German defence supplier KNDS will decide in the coming months whether to launch an initial public offering next year, CEO Jean-Paul Alary said on Monday, and suggested the German government might take a stake in the company.

Speaking to reporters in Amsterdam, Alary said KNDS's board had told him to be prepared for an IPO but that a final decision had not yet been taken.

"As a first step, I cannot see ... a reference shareholder that will not be a German shareholder," Alary told Reuters following the press conference in Amsterdam.

Asked whether this meant that the German government might take a stake in KNDS, he said: "It makes sense that there is a first step like that."

Alary, who took over as CEO in April, confirmed KNDS had held talks with the German government about potentially acquiring a blocking minority among other matters.

Formed in 2015 with the merger of Germany's Krauss-Maffei Wegmann (KMW) - famous for making Leopard tanks - and French state-owned weapons maker Nexter, KMW's previous private owners and the French government remain joint shareholders.

Reuters reported in February that KNDS was considering an IPO as early as the end of this year.

European defence firms have received a boost with the surge in military spending provoked by Russia's 2022 invasion of Ukraine, as governments move to bolster their own security while supplying Kyiv with weapons and ammunition.

Longer term, Alary said a listing could open the company's capital to reference shareholders linked to other European nations and supply KNDS with the funds to finance what he called "bold" acquisitions.

An acquisition in Italy might be one option, he added, despite the latest setback KNDS suffered with regard to its bid for Iveco Defence.

"It would have been a great opportunity to make a step forward in Italy. I do hope that is not the end of the game," he said, underscoring it would be good for KNDS to have three major pillars in Europe, comprising France, Germany and Italy.

When asked about potential investors in KNDS, Alary ruled out Rheinmetall, which has pursued diversification while KNDS, he said, is resolved to remain dedicated to producing land systems.

Airbus and Thales were not being considered either, he said.

KNDS, meanwhile, aims to name a new chairman in the coming weeks, Alary said, before the potential announcement of a new capital structure.

"I think the new chairman should be fully involved in the finalisation of this key decision," he said.

The company could also start using its French factory capacity to help produce components for weapons built in Germany, Alary said.

Legal requirements have compelled KNDS to produce KMW and Nexter legacy weapons in the countries where their intellectual property rights are held, creating a major hurdle to the integration of the merged company.

"We have some scenarios in mind that could make sense and could deliver such manufacturing capacity by 2026," said Alary, adding that the plans would require clearance by authorities.

Asked when the first joint KNDS main battle tank will be built - a vehicle to replace the German Leopard and the French Leclerc, which could also be the first joint product of the Franco-German company - Alary said it could be ready sometime between 2032 and 2035.

(Reporting by Sabine Siebold; Editing by Joe Bavier)