Government Grip Tightens on KNDS as Auditor Delays and Factory Deals Complicate €20bn IPO

Franco-German tank maker KNDS faces auditor delays, state ownership battles, and a €23.5bn backlog as it pushes for a summer float and industrial expansion.

The Franco-German tank maker KNDS is sprinting to add production capacity at the same time as a political power struggle over ownership reaches a critical juncture, all while auditors hold up the paperwork needed for a summer float. The company’s order backlog has swelled to roughly €23.5bn, and record intake of €11.2bn last year leaves little doubt about demand — but execution risks are piling up on multiple fronts.

Berlin and Paris have already agreed to take 40% stakes each ahead of the planned IPO in June or July, a move that effectively shuts out external consolidators such as Rheinmetall. The Düsseldorf-based defence group’s chief executive, Armin Papperger, had been holding talks with German politicians and state-owned lender KfW about acquiring a significant stake from the German family that currently controls half of KNDS, or alternatively buying the German arm entirely. With the two governments set to control 80% of the voting rights, little room remains for private investors — at least in the near term. Both governments intend to reduce their holdings to 30% each over time.

That state-backed structure has also forced analysts to slash their valuation estimate for the company from as much as €25bn to a range of €18bn to €20bn. The lower figure reflects the limited free float and the competitive threat KNDS will pose to Rheinmetall once it gains stock market funding. Meanwhile, a rival offer from the Czech ammunition group CSG — predominantly cash — has been tabled for the German family’s shares. The family, however, favours the IPO and a sale to Berlin, potentially scuppering CSG’s ambitions.

The most immediate obstacle to floating is not political but accounting. PricewaterhouseCoopers, the auditor, is refusing to sign off on the 2025 annual report while an internal investigation into a 2013 contract with Qatar worth nearly €2bn remains open. KNDS management expects the probe to be completed shortly, which would clear the way for a prospectus. A dual listing in Paris and Frankfurt is planned, with about a quarter of the shares to be placed in public hands.

To tidy up its balance sheet before listing, KNDS has sold a chunk of its stake in engine specialist Renk. A placement of 5.8m shares at €44.95 each — a 2.8% discount to the prior day’s close — raised approximately €269m. Demand covered the offering quickly after launch.

While the financial and governance issues play out behind closed doors, KNDS is pressing ahead with industrial expansion that could transform old automotive plants into armour production lines. The company is in talks with Mercedes-Benz to take over its Ludwigsfelde site south of Berlin, where around 2,000 workers could switch employers. During a transition phase, KNDS would lease parts of the facility to produce military vehicles alongside Sprinter vans before a full buyout. Separately, management is examining Volkswagen’s Osnabrück site in Lower Saxony. Investment of roughly €1bn is earmarked for new production lines.

The capacity crunch is real: annual sales of €3.8bn are dwarfed by a backlog of €23.5bn. The Bundeswehr is considering thousands of Boxer wheeled armoured vehicles, and in mid-May KNDS secured a billion-euro order from the UK for 72 RCH-155 howitzers. The company is also reportedly eyeing Iveco’s defence unit, which is up for sale, alongside rivals Leonardo and CSG.

With the summer IPO window fast approaching, KNDS must resolve the auditor impasse, finalise state shareholdings, and fend off unsolicited bids — all while keeping its factory conversion plans on track. Europe’s biggest tank builder is under pressure from all sides.