A few years ago, European governments were quietly selling off pieces of their defense companies. Now they're racing to buy them back.
The latest move came this week, and it's the biggest one yet.
The Stake
Germany said it will buy a 40% stake in KNDS when the company lists in Frankfurt, matching the 40% stake France already holds, according to a German government official who spoke to Reuters.
That puts both governments together at 80% ownership of Europe's biggest tank maker on day one of trading.
Both stakes are set to drop to 30% over the next two to three years, but voting power stays equal regardless of who owns more, which keeps Berlin and Paris on level footing.
KNDS makes the Leopard 2 and Leclerc XLR main battle tanks, the Boxer armored personnel carrier, and tracked artillery vehicles, after being formed in 2015 by merging France's Nexter with Germany's Krauss-Maffei Wegmann.
About 11,000 people work for KNDS, which posted €3.8 billion in sales in 2024, and bankers expect the Frankfurt IPO to value the company near €20 billion ($23.3 billion), with the listing slated for June or July.
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Why The Buyback Is Happening Now
European defense spending has gone vertical over the past three years, with Chancellor Friedrich Merz pushing for an EU budget reshaped around defense priorities.
The shift has a clear cause. Relations with the US under President Donald Trump have frayed, and European leaders no longer want to count on Washington for big-ticket security needs.
Tank orders are climbing, with artillery, ammunition, and Boxer orders climbing alongside them, which is why owning a slice of the supplier of all of that lets Berlin keep a seat at the table on jobs, factory locations, and what gets exported.
Germany has also lifted its borrowing limits and set aside billions to rearm, which has been a major driver of the European defense boom.
What To Watch
The IPO timing is the big variable, with bankers eyeing June or July, though defense listings can slip based on investor demand.
KNDS Chairman Tom Enders welcomed the move but said 80% government ownership should be "only the beginning," meaning he wants the state stakes to come down faster than the official plan calls for.
The other open question is the Franco-German fighter jet project, where Germany and France are still deadlocked on a €100 billion next-generation combat aircraft, and the KNDS deal could shift the temperature of those talks.
Berlin just put public money behind the most important defense IPO of the year.
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