Portugal Colonial - France, Germany reach deal on arms maker KNDS, paving way for IPO

The deal envisages Paris and Berlin holding equal stakes in the maker of tanks and other military gear, at a time when the continent is contending with a hostile Russia and worsening US ties.

Amsterdam-headquartered KNDS has a portfolio ranging from Leopard 2 and Leclerc tanks to artillery and armoured vehicles, and is a key supplier to European militaries.

The announcement comes just weeks after the collapse of the Franco-German FCAS project to build a next-generation fighter jet, which dealt a severe setback to efforts to strengthen Europe-wide defence initiatives.

The KNDS deal "reflects the shared determination of France and Germany to strengthen Europe's industrial and defence capabilities, to support their armed forces, and to reinforce European sovereignty in an enduring fashion," according to a joint statement issued by the French presidency.

The German government also said the deal would bolster Europe's defence capabilities.

"The government aims in particular to strengthen bilateral and European armaments cooperation. Cooperation with France plays a key role in this regard," it said in a statement.

KNDS, created in 2015 through a merger of French and German companies, is currently half-owned by the French government via a holding company, with the rest of the shares owned by the Wegmann family of Germany.

The German owners are seeking to sell their stake and have been negotiating with the German government.

After much internal wrangling, Berlin announced in May that it would seek to acquire a 40-percent holding when the company goes public.

In Monday's announcement Berlin and Paris said they were aiming to become shareholders in KNDS, with equal stakes.

KNDS chief executive Jean-Paul Alary said the agreement "confirms the strategic importance of KNDS for Europe's defence capability, industrial base and technological sovereignty".

- Ready for share listing? -

The deal would allow KNDS to move forward with a dual stock market listing in Paris and Frankfurt, in one of Europe's most hotly anticipated IPOs of the year.

The company has previously voiced frustration at alleged foot-dragging by the German government, which reports say has threatened to delay a listing that could value the company at 15 to 20 billion euros ($17 to $23 billion).

KNDS is a key player in a joint Franco-German project to develop a new battle tank, dubbed the Main Ground Combat System (MGCS) initiative.

The agreement Monday and subsequent IPO boosts the chances that this delayed programme might go ahead, after the FCAS failure fuelled fears it might also be scrapped.

But the timeline is tight if KNDS wants to launch its IPO in July as hoped, according to a confidential German defence ministry document outlining the latest details of the deal, circulated to lawmakers and seen by AFP.

The ministry said parliament's budget committee would have to approve Berlin's stake acquisition when it meets on Wednesday for the IPO to proceed next month.

The committee has to sign off on any substantial defence procurements.

The ministry acknowledged the "tight schedule" and also noted that "agreement with the Wegmann family on the purchase contract must be reached".

Multiple regulatory approvals for the IPO are also needed and there is a risk they might not be ready in time, it said.

F.Carias--PC