A new step towards the consolidation of the European defense industry.
According to what was revealed yesterday by the Financial Times, the Czech group Czechoslovak Group (Csg) submitted in recent weeks a proposal to the Bode-Wegmann family, 50% shareholder of Knds, the Franco-German tank manufacturer, to acquire a significant stake in the company with a predominantly cash offer.
The proposal comes as Knds – half-owned by the French state and half by the Bode entrepreneurial dynasty – is proceeding with a plan for a stock market listing by early July, aiming for a market capitalization between 15 and 20 billion euros.
A potential merger could complicate an already delicate political situation, in which the German government is trying to acquire shares of Knds to align with the shareholding held by the French counterparts, ahead of a possible initial public offering (IPO) planned for this year, notes Bloomberg.
“The young billionaire heading the Czech group Csg, Michal Strnad, sent a letter of interest to the Bode-Wegmann family, 50% shareholder, to acquire a stake in the producer of the Caesar howitzer and the Leopard tank. But so far he has received a firm refusal,” reported yesterday the French newspaper Les Echos.
Meanwhile, this morning the shares of the Czech defense company fell by 1.34%, standing at 15.74 euros, well below the IPO price of 25 euros. Csg shares have lost ground since its stock market debut in Amsterdam in January with a value of 30 billion euros, the largest IPO ever in the defense sector.
All the details.
CSG’S OFFER FOR KNDS
According to the British financial daily, the Czech ammunition manufacturer has made a proposal to acquire a stake in the Franco-German tank manufacturer, in a move that represents a new attempt to consolidate the European defense industry, but which will likely face political resistance.
The offer is entirely or predominantly in cash, some sources told the FT, adding that it is not yet clear whether Csg’s proposal to acquire a significant stake will gain approval.
THE CZECH GROUP’S ACQUISITIONS IN RECENT YEARS
Founded in 1990, with its main headquarters in Prague, Csg is an industrial group active globally in 5 strategic business segments: aerospace, defense, transportation, railway sector, and development projects. The company is 100% controlled and managed by Michal Strnad. The group employs over 14,000 employees worldwide and owns a portfolio of industrial companies engaged in both civil and defense sectors.
As the Financial Times also recalls, Csg has shown interest in acquisitions in the past.
In Italy last year, the Czech group entered the race to acquire Iveco Defence Vehicles (Idv), which was later sold to Leonardo. Csg is already present in our country. In December 2023 Csg announced it had agreed to acquire an 80% stake in the Italian high-end sporting and hunting rifle manufacturer Armi Perazzi. At the end of November 2022, Csg had acquired 70% of Fiocchi Munizioni, a historic company from Lecco and one of the largest global producers of small-caliber ammunition.
But an acquisition of a significant stake in Knds “would represent its boldest operation” according to the FT.
WHAT IS KNDS
Born about ten years ago from the merger between the German tank manufacturer Krauss-Maffei Wegmann (Kmw) and the French competitor Nexter, Knds supplies Leopard 2 tanks to the German armed forces and Caesar howitzers to the French army.
As already mentioned, the company, which is a key supplier to Ukraine, is equally owned by the German Bode-Wegmann family and the Paris government.
IPO TIMING
The initiative comes at a particularly opportune moment: the Bode-Wegmann family is preparing to sell its stake in Knds ahead of the stock market listing by early July, aiming for a market capitalization between 15 and 20 billion euros.
The family intends to exit as soon as possible, while the German federal government is preparing an entry with a blocking minority of at least 25%, Reuters explained in March Reuters. According to sources close to the dossier, it remains unclear whether this operation will take place before, during, or after the IPO. The goal is for the major French and German shareholders to maintain a balanced parity even after the listing, Reuters further emphasized.
POLITICAL ASPECTS ALSO IN FOCUS
Since the French state holds a stake, both Paris and Berlin have a political interest in the future ownership of the group and potential influence on its programmatic priorities and the location of its production sites, highlights the Financial Times, recalling that in Germany there have also been internal conflicts within Chancellor Friedrich Merz’s coalition about the shareholding to be acquired from the German family.
WHAT HAPPENS TO THE SECTOR’S STOCKS
Finally, the potential listing of Knds occurs in a context of declining valuations of defense sector stocks.
Csg’s IPO earlier this year valued it at 25 billion euros, but its market capitalization has since fallen to less than 16 billion euros, due to the general decline in sector stocks.
In particular, Csg shares plunged sharply this month after the short-selling firm Hunterbrook claimed that the company had omitted information from the IPO prospectus and asserted there was “a broader pattern of undeclared or under-declared insiders in key subsidiaries and business practices of Csg.” The Czech manufacturer has denied the accusations made by the short-selling firm.
Rheinmetall shares, among the main European groups in the defense sector and protagonists of strong growth in recent years, have also lost about 30% since the beginning of the year, penalized by fears related to achieving sales targets.
