Berlin is set to acquire a 40% stake in KNDS, the Franco-German defence manufacturer behind the Leopard 2 battle tank and the Caesar howitzer, according to government sources who spoke to AFP on Wednesday. The move marks a significant step in Germany's efforts to gain greater influence over a company that is currently effectively controlled by the French state.
Under the terms of the agreement, the German government will initially purchase shares at the price of KNDS's planned initial public offering. The stake will then be reduced to 30% within two to three years, a source familiar with the matter said. The arrangement grants Berlin the same rights as Paris, including after the stake is lowered.
KNDS was created in 2015 through the merger of France's Nexter and Germany's Krauss-Maffei Wegmann. The company is currently part-owned by GIAT Industries, a French public holding company, with the German Wegmann family holding the remainder. The French state's effective control has long been a point of contention in Berlin, which has sought a more balanced ownership structure as Europe accelerates its rearmament efforts.
A Strategic Shift in European Defence
The German government's decision to invest comes at a time when defence stocks are surging across the continent, driven by the EU's push to bolster military capabilities in response to Russia's war in Ukraine and broader geopolitical uncertainties. KNDS had been preparing for an IPO, and Berlin's entry is seen as a way to secure a seat at the table in shaping the company's future direction.
France, for its part, has agreed to reduce its own stake in KNDS "insofar as possible," the source added. This suggests a mutual desire to rebalance the Franco-German partnership, which has been a cornerstone of European defence cooperation but has also faced tensions over industrial leadership and export policies.
The company is a critical supplier to both the German Bundeswehr and the French Armée de Terre. Its Leopard 2 tanks are a mainstay of NATO's armoured forces, while the Caesar howitzer has been widely used by Ukraine's military. The dual-nationality structure has sometimes complicated export decisions, as Germany and France have differing rules on arms sales to third countries.
Berlin's move is part of a broader trend of European governments seeking to deepen their involvement in defence industries. As Europe's strategic awakening accelerates, capitals are increasingly looking to secure supply chains and maintain technological sovereignty. The KNDS stake is a concrete example of how states are using financial instruments to achieve strategic goals.
The agreement also underscores the importance of Franco-German cooperation in the defence sector. While the two countries have often clashed over issues ranging from energy to fiscal policy, they have managed to maintain a working relationship on military hardware. The KNDS deal could serve as a model for other joint ventures, though it remains to be seen how the reduced stakes will affect governance.
For now, the IPO plans are on hold as the German state prepares to enter the shareholder register. The exact timeline for the offering has not been disclosed, but sources indicate it will proceed once the ownership structure is finalised. The defence sector's recent boom, fuelled by increased European defence spending, makes KNDS an attractive investment.
Critics, however, warn that state involvement could slow decision-making and reduce competitiveness. Proponents argue that it ensures key capabilities remain under national control. The balance between public oversight and private efficiency will be tested as KNDS navigates the post-IPO landscape.
