Paris-Berlin tank deal invents IPO nationalisation

Leonardo SpA

21/05/2026 09:55

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Pierre Briancon

BERLIN, May 21 (Reuters Breakingviews) - France and Germany have found a novel way to tighten their grip over a military asset. European tank maker KNDS is headed for an initial public offering because its co-owner, a German family vehicle, wants to sell out. Yet that listing may now leave the two countries with 80% of the company’s shares. It could cripple KNDS’s governance and hinder its ability to become a major player in the consolidation of Europe’s tank sector.

KNDS is brave to test the markets now. The maker of Leopard and Leclerc vehicles booked €3.8 billion worth of sales in 2024 and sits on an order backlog equivalent to 6 years worth of revenue. Breakingviews analysis suggests it could be worth around €14 billion. Yet defence stocks are down 7% this year and the share price of industry leader, Germany's Rheinmetall RHMG.DE, has fallen 24%. The January IPO of a high-profile arms maker, Czechoslovak Group was just the prelude of a 40% slide in the stock price.

Potential investors in KNDS will also have to grapple with a murky governance. Under the plan, Germany will buy some 40% of the company’s shares in the IPO, while the Wegmann family sells out and Paris trims its 50% stake to the same level as Berlin. That would leave traditional investors with just a 20% share, a slim free float and minimal say. Over time, the two governments may shrink their stakes down to 30% each. But in any case, and however big their holdings, the two countries have decided to keep equal voting rights in the tank maker. There is a risk this leads to paralysis in the group’s governance, similar to what crippled Airbus at the turn of the century.

Germany has taken the lead in Europe’s fast defence buildup with a massive increase of its military budget, while France is lagging behind even though it is now the world’s second-largest arms exporter after the U.S. As shown by the constant bickering between Paris and Berlin on supposedly common projects like the next-generation fighter jet or - more topical for KNDS - the ground combat system of the future, differences are the rule rather than the exception.

The increased government influence could also prove an obstacle if the European tank industry ever consolidates. Regional players like Rheinmetall, Italy’s Leonardo LDOF.MI or even the UK’s BAE Systems BAES.L could decide to create a kind of Airbus of armed vehicles. Yet KNDS’ government backers would need to be willing to dilute their control for it to participate.

Investors in defence companies know of course that governments’ influence in the industry goes without saying. But they may prefer groups with shareholder structures that don’t point to a serious risk of deadlock.

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CONTEXT NEWS

Germany will ‌acquire a 40% stake in Franco-German defence equipment group KNDS when it lists on the stock market, a German official said on May 20, matching the size of France’s stake in the maker of the Leopard tank. Both governments would be expected to reduce their stakes to 30% over the ​next two to three years, but both would hold equal voting rights regardless of the size of each ​stake, said the official, who spoke on condition of anonymity.

European defence stocks have sunk this year https://www.reuters.com/graphics/BRV-BRV/mypmylwmqpr/chart.png

(Editing by Neil Unmack; Production by Shrabani Chakraborty and Oliver Taslic)

((For previous columns by the author, Reuters customers can click on BRIANCON/pierre.briancon@thomsonreuters.com))