KNDS Eyes Idle Auto Plants and €20bn Valuation as Record Backlog Fuels IPO Prep

European defence group KNDS plans to repurpose auto factories for tank production amid record €33.1bn order backlog, ahead of a dual IPO in Frankfurt and Paris.

The European defence group KNDS is in active talks with Volkswagen and Mercedes-Benz to repurpose two underused car factories for military vehicle production, CEO Jean-Paul Alary confirmed on 26 May 2026. The discussions with Mercedes’ Ludwigsfelde site and Volkswagen’s Osnabrück plant are part of a broader strategy to fast-track capacity expansion without building new facilities from scratch, as Europe’s rearmament drive lifts demand for the Leopard 2A8 main battle tank and CAESAR howitzers to historic levels.

The need for extra production space is underscored by the company’s latest order book. At the end of 2025, KNDS reported a record backlog of €33.1bn, up from €23.5bn a year earlier, after pulling in €13.5bn of new orders during the year. Over 300 Leopard 2A8 units have now been ordered across Europe, with recent contracts from the Czech Republic, the Netherlands and Croatia, while CAESAR orders from Lithuania and Croatia have prompted an expansion of the assembly line in Roanne, France.

Financial results for 2025 reflect the surge in demand. Revenue jumped 15.9% to €4.4bn, operating profit (EBIT) climbed to €661m from roughly €500m the prior year, and the EBIT margin improved from 13.2% to 15.0%. The ammunition segment was the standout performer, with sales up 24.7% to €612m, thanks in part to a new automated production line for 155 mm shells in Belgium. KNDS has also signed a framework agreement with Alstom to integrate its Görlitz facility into the land-vehicle components network.

All of this is paving the way for a dual initial public offering in Frankfurt and Paris, scheduled for June or July 2026 with Lazard as adviser. Bankers value the group at roughly €20bn, and the free float is expected to be around 25%, made up of a stake sale by the Wegmann family plus a capital increase to fund research, development and manufacturing capacity. The German government has committed to buying 40% of the shares at the IPO price, matching the French state’s existing holding. Both states then plan to reduce their stakes to 30% within two to three years after listing, while retaining the same voting rights.

One remaining hurdle has also been cleared. KNDS has finished an internal investigation into a 2013 transaction with the Qatari armed forces, and the annual audit for 2025 has been completed, removing the last formal obstacles to the flotation.

The move to tap idle automotive capacity comes as KNDS seeks to scale up production quickly amid an unprecedented order intake. Rather than tying up capital in greenfield defence plants, the group is capitalising on the shift to electric vehicles, which has left factories such as Ludwigsfelde and Osnabrück partly dormant. If the negotiations succeed, those sites could start manufacturing military hardware without the usual multi-year construction delays, giving KNDS a crucial edge as European governments race to replenish arsenals.