Germany to buy 40% stake in defence group KNDS

The German government has decided to take a stake in Franco-German defence group KNDS after months of consideration, a government source told dpa.

Berlin plans to acquire an initial 40% stake in the maker of Leopard 2 battle tanks and Panzerhaubitze 2000 artillery systems, before reducing the holding to 30% within two to three years, the source said.

KNDS was created through the merger of Germany's Krauss-Maffei Wegmann and France's Nexter. The company is currently jointly owned by the German family behind Krauss-Maffei Wegmann and the French state. Media reports have valued KNDS at around €20 billion ($23.3 billion) ahead of a planned stock market listing.

According to the source, Germany also wants France to lower its current 50% stake if possible. Berlin is seeking guarantees that Germany and France will retain equal rights on key issues such as production site decisions, even after the German state cuts its holding to 30%.

The purchase price will be based on the initial public offering price at which shares are sold to private and institutional investors, the source added, saying Germany would not pay a premium for the stake. The German Economy Ministry will oversee the investment.

Defence Minister Boris Pistorius first floated the idea of a state stake in KNDS last year as part of a broader push for greater government involvement in Germany's defence industry.

"We need state shareholdings, I am firmly convinced of that, also to ensure that know-how and jobs remain in Germany," Pistorius told the German business daily Handelsblatt in October, adding that the government was also examining shipbuilder TKMS.