KNDS Lines Up Former Mercedes and VW Plants as €1bn Capacity Splurge Fuels IPO Story

KNDS seeks to convert Mercedes and VW factories into tank assembly lines, invests €1B, and targets a Paris-Frankfurt IPO amid ownership negotiations and audit delays.

The Franco-German defence group KNDS is taking an unconventional route to scale up production: it wants to turn idled car factories into armoured-vehicle assembly lines. The company is in talks to acquire the Mercedes-Benz plant in Ludwigsfelde, south of Berlin, and is also evaluating the Volkswagen site in Osnabrück, Lower Saxony. Around 2,000 workers could switch employers in the Ludwigsfelde deal alone, with KNDS initially leasing part of the facility to build military vehicles alongside Sprinter vans before a full takeover.

The planned investment in new production capacity totals roughly €1 billion. The urgency stems from an order book that has ballooned to €23.5 billion against annual revenue of just €3.8 billion — a clear sign that existing facilities are stretched to the limit. The Bundeswehr is weighing the purchase of thousands of Boxer wheeled armoured vehicles, while KNDS secured a contract from the British Army in mid-May for 72 RCH 155 wheeled howitzers.

To help fund this industrial push and strengthen its own balance sheet ahead of a planned initial public offering, KNDS has just offloaded a large block of shares in listed tank transmission specialist Renk. It placed 5.8 million Renk shares with institutional investors at €44.95 apiece, raising around €269 million. Deutsche Bank and Goldman Sachs ran the accelerated bookbuilding, with Lazard advising the seller. After settlement on 22 May 2026, KNDS will hold roughly 10% of Renk, down from 15.83%, and the remaining stake is subject to a 180-day lock-up.

Dual listing takes shape amid valuation tug-of-war

KNDS is targeting a dual listing in Frankfurt and Paris this year, with plans to float around a quarter of its equity. Initial hopes of a €20 billion to €25 billion valuation have been trimmed by advisers to a range of €18 billion to €20 billion, according to people familiar with the process. Chief executive Jean-Paul Alary said preparations are on track, despite political discussions about the timing.

The ownership structure remains the most sensitive puzzle. KNDS is currently split equally between the French state and a group of wealthy German families. Berlin now wants to acquire a 40% stake before the IPO, bringing its influence in line with Paris, which would reduce its own holding to the same level. That plan faces a complication from Czech defence group CSG, which has made an offer to buy out the German families. They favour the IPO route and a sale to the German government, but CSG’s overture threatens to derail Berlin’s ambition of securing a blocking minority.

Meanwhile, a process hurdle could delay the whole timetable. Auditor PwC has refused to sign off on KNDS’s 2025 financial statements due to an ongoing internal investigation into a roughly €2 billion contract in Qatar dating back to 2013. Without an audit certificate, the company cannot draw up a securities prospectus. Management expects the audit to be completed shortly, which would keep a summer listing within reach.

Industrial logic outweighs political noise

KNDS is pressing ahead with its capacity expansion regardless of the ownership and audit uncertainties. The conversion of former automotive plants into tank and howitzer factories reflects a bet that European defence demand will stay elevated for years — well beyond the planned IPO. The Renk divestment both raises cash and signals to future investors that KNDS is streamlining its portfolio. That combination of factory deals, state backing and a €269 million capital injection gives the group a powerful narrative as it prepares to hit the market. Whether the auditors sign off in time will determine if that story begins this summer or later.