KNDS Pins IPO Hopes on Airbus-Inspired Governance as Berlin and Paris Carve Up 80% Control

KNDS CEO confirms June/July IPO on schedule despite government delay request, but dual-state control and limited free float may demand a valuation discount.

The management of European tank builder KNDS is refusing to bow to Berlin's request for a delay. Chief executive Jean-Paul Alary confirmed on Friday that preparations for the dual listing in Frankfurt and Paris remain on schedule, pushing back against a government call to wait until autumn for more talks on a direct state entry. The message from the boardroom is clear: the market window for defence stocks is open, and the company intends to use it.

That political tension forms the backdrop to what will be one of the largest European listings this year. Germany’s state-owned KfW bank is set to acquire a 40 percent stake, matching the holding France will take after reducing its current 50 percent interest. At a total valuation of €18 billion to €20 billion, the German side could pay as much as €8 billion for its slice. The result is a float with a free float of only 20 percent — barely enough to satisfy the most lenient liquidity rules.

Operationally, the argument for buying in is compelling. Revenue rose to €3.8 billion in 2024, while order intake surged past €11 billion. That has swollen the backlog to a record €23.5 billion, up 15 percent year-on-year. Demand for systems such as the Leopard 2 A8 battle tank and the CAESAR howitzer shows no sign of easing, giving KNDS strong underlying momentum as it courts investors.

Yet the governance structure is giving equity analysts pause. Both governments plan to reduce their holdings to 30 percent over the next two to three years, but their voting rights will remain unchanged under a special accord that guarantees equal sway over strategic decisions and production locations. That arrangement locks in dual-state control even as their economic exposure shrinks, a model that Brussels has seen before — and not always welcomed.

The company itself points to the Airbus precedent. The aerospace giant’s governance framework was designed to balance national security interests and industrial influence between Berlin and Paris after private investors came on board. KNDS is now attempting to replicate that balancing act. The difference is that Airbus has a much larger free float and a track record of shareholder-friendly governance; KNDS is asking investors to accept the promise of stability in exchange for near-total exclusion from decision-making.

The market is likely to demand a discount for that risk. Traditional fund managers rarely warm to structures where governments retain veto power regardless of their capital contribution, especially when the scope for future M&A is limited by political considerations. KNDS’s ability to drive further consolidation in the European defence industry — such as the kind Leonardo demonstrated when it closed the €1.6 billion acquisition of Iveco Defence Vehicles on March 18 — could be hamstrung if every strategic move requires dual-government approval.

The IPO is still expected in June or July, with the founding family of the former Krauss-Maffei Wegmann planning to exit completely. That timeline leaves little room for Berlin to renegotiate the terms of its entry, and management shows no sign of slowing down. The prospectus will have to lay out the governance trade-offs in plain language, and early reports suggest the offering could price KNDS at more than $23 billion.

Whether private investors accept those terms will depend on how they weigh the record order book against the political handcuffs. The next few weeks will reveal whether the market is willing to buy into a quasi-nationalised champion or whether the government grip will prove too tight for comfort.