Germany and France clash over KNDS IPO as Berlin delays stake decision

German-French tank manufacturer KNDS’s planned initial public offering has triggered a new dispute between Berlin and Paris.

KNDS, formed more than a decade ago through the merger of German arms manufacturer Krauss-Maffei Wegmann (KMW) and French company Nexter, is due to go public no later than July.

According to German Foreign Policy, Paris is pressing for the IPO to proceed because it wants to avoid any disruption linked to the presidential election campaign expected to begin in the autumn.

The German government, however, remains divided over whether it should seek a 40% stake in KNDS, matching the French state’s planned holding, or settle for 30%.

Berlin’s failure to act threatens to derail the entire flotation, prompting KNDS to consider moving forward without German state participation.

Under that scenario, defense companies from other countries could acquire shares. France is reportedly considering the participation of Italy’s Leonardo group, while Prague-based ammunition manufacturer Czechoslovak Group (CSG) has also expressed interest in joining the project.

At the same time, corruption allegations threaten to seriously disrupt the IPO process.

A brief history of German-French tank manufacturer KNDS

KNDS was established in 2015 through the merger of Germany’s tank manufacturer Krauss-Maffei Wegmann and France’s Nexter.

KMW is known for products including the Leopard 2 main battle tank and the Boxer armored vehicle, while Nexter manufactures the Leclerc main battle tank and the Caesar howitzer.

Like the Franco-German Airbus Group, the joint venture is officially headquartered in the Netherlands.

Until now, the French government on one side and Wegmann Holding on the other have each held 50% stakes.

Within Wegmann Holding, the Bode and Braunbehrens families, which maintain tight control over KMW, have combined their interests.

A KNDS stock market listing has been under discussion for a considerable period, with Wegmann Holding prepared to sell all of its shares.

In that context, the German government in particular has attached great importance to ensuring that Germany and France retain as equal an influence as possible even after the IPO.

So far, KMW and Nexter have continued producing their traditional products at their respective national facilities, with KMW accounting for the larger share at 70%.

Berlin fears losing control over that balance. It is argued that France could otherwise gain excessive access to the Leopard 2 and its underlying technology.

Uncertainty over Germany’s future stake

Regarding the IPO, Paris plans to sell 10% of its shares in KNDS while retaining 40% under state ownership.

Berlin, by contrast, has yet to decide on its own stake, despite the flotation originally being scheduled for next month and despite the German owners, the French government and KNDS insisting on maintaining that timeline.

According to reports, Defense Minister Boris Pistorius supports a 40% stake in order to preserve full parity with France.

Economy Minister Katherina Reiche and the Chancellery, however, favor a 30% stake to reduce costs, arguing that under Dutch law such a holding would be sufficient to secure the desired control rights.

Thomas Enders, the new chairman of KNDS’s supervisory board, is advocating for a stake of just 25.1%. The former Airbus CEO has noted that the German and French governments each hold less than 11% in Airbus.

As a result, if Paris could be persuaded to reduce its KNDS stake, additional private capital could be mobilized. During his tenure at Airbus, Enders succeeded in aligning the governments’ shareholdings.

France’s patience is wearing thin

The German government’s inability to reach an agreement on its KNDS stake now threatens to throw the entire IPO timetable off course.

According to an internal document recently cited by Handelsblatt, reaching an internal agreement by the summer is considered an “extremely ambitious” goal.

However, postponing the IPO until autumn is being rejected by both the French government and the German shareholder families.

On the one hand, they fear that KNDS’s market valuation — currently estimated at €20 billion — could decline over the course of the year, as happened with Rheinmetall, thereby reducing the value of the shares being sold. On the other hand, Paris wants to conclude the deal before the presidential election campaign scheduled to begin after the summer break.

Chairman Enders had already increased pressure in April. KNDS says the German government has been aware of the company’s IPO plans since the beginning of 2025 and has therefore had sufficient time to make a decision.

On Friday, KNDS CEO Jean-Paul Alary intensified that pressure further in a statement saying the company remained committed to its original timetable “in light of media speculation regarding a possible postponement of the IPO.”

The situation threatens to leave the German government sidelined.

Czechs and Italians also show interest

Reports that other defense companies are interested in acquiring KNDS shares have further complicated the situation.

France is reportedly considering encouraging Italian defense company Leonardo to invest. That could result in a French-Italian majority within KNDS.

Meanwhile, the Financial Times reported that Prague-based Czechoslovak Group, which is little known in Western Europe, is also considering purchasing shares. CSG manufactures ammunition and increased its revenue by 193% from 2023 to 2024 to $3.63 billion, largely due to large-scale deliveries to Ukraine.

The company particularly benefited from the Czech ammunition initiative under which President Petr Pavel raised billions of dollars in donations to finance ammunition purchases later exported to Kyiv by companies including CSG.

In SIPRI’s 2024 ranking of the world’s largest arms companies, CSG placed 46th, directly behind KNDS in 42nd place.

The company has continued expanding through acquisitions, including US ammunition producer The Kinetic Group, and is now reportedly in talks with Wegmann Holding over a potential share purchase.

Corruption allegations

The planned IPO is unfolding under the shadow of corruption allegations tied to the 2013 sale of 62 Leopard 2 main battle tanks and 24 Panzerhaubitze 2000 self-propelled howitzers to Qatar.

The purchase price was estimated at around €1.89 billion. According to reports, KMW — long before its merger into KNDS — appointed the Qatari company Kingdom Projects as an intermediary and paid it €85 million to secure the contract.

At the time, 75% of Kingdom Projects was owned by Sheikh Ahmed bin Nasser Al Thani, deputy chief of staff of Qatar’s military intelligence service and a member of the ruling family in Doha, while the remaining 25% belonged to his son.

KNDS says it has launched an investigation into the matter in order to clarify the allegations. According to reports, auditing firm PwC considers the accusations serious enough to delay issuing its audit opinion on KNDS’s 2025 annual financial statements.

As a result, it remains uncertain whether the IPO can proceed as planned under these conditions.