KNDS Faces Twin Obstacles Ahead of Dual Listing: State Grip and Auditor Stalemate

What was meant to be Europe’s largest defence IPO of the year is now caught between a governance standoff and a missing auditor’s signature. Germany and France’s artillery powerhouse KNDS had hoped to launch a dual listing in Frankfurt and Paris as early as June or July, but the path to market has become noticeably more complicated.

The investment banks steering the deal — Bank of America, Deutsche Bank, Goldman Sachs and Société Générale — have already dialled back their valuation expectations. The initial target of €25bn has been trimmed to a range of €18bn to €20bn. The shift reflects a deeper problem: 80% of the shares are staying in government hands, leaving only a fifth of the equity to trade freely.

That structure is giving institutional investors serious pause. Germany confirmed at the end of May it will take a 40% stake via state lender KfW at the IPO price. France already holds an equivalent 40% position. For minority buyers, the prospect of low liquidity and minimal boardroom influence has prompted analysts to demand a valuation discount. KNDS supervisory board chairman Tom Enders has publicly urged both governments to commit to a long-term exit. Paris and Berlin have indicated they aim to reduce their holdings to 30% apiece over three years, but for now the prospect of state dominance remains.

Should investors sell immediately? Or is it worth buying KNDS?

Complicating matters further, auditor PwC has so far refused to sign off on the company’s 2025 financial statements. The hold-up stems from an internal investigation by law firm Freshfields into a 2013 tank deal with Qatar worth nearly €2bn. While the probe has not uncovered evidence of wrongdoing, PwC will not issue its attestation until it sees the final report. Without audited accounts, there can be no securities prospectus and no IPO. The banks still consider a summer launch possible, though September is emerging as the fallback window. Government circles describe the original June or July timetable as “very ambitious.”

The operational story, by contrast, could hardly be stronger. KNDS posted €4.4bn in revenue last year, with the German Land Systems division growing 17.4% to €2.5bn and the French unit rising 9.6% to €1.3bn. Operating profit hit €661m, pushing the margin from 13.2% to 15.0%. The order backlog stands at €33.1bn. Britain recently ordered 72 RCH 155 howitzers for nearly £1bn, and on 3 June the US Army selected the system as a candidate for its Mobile Tactical Cannon programme.

To meet surging demand, CEO Jean-Paul Alary is pushing a factory expansion plan that includes talks with Volkswagen and Mercedes about taking over plants in Osnabrück and Ludwigsfelde. The most advanced discussions involve Mercedes’ site near Berlin, where one production line could keep building Sprinter vans while another assembles Boxer armoured vehicles. In Norway, KNDS has opened a new facility with local partner RITEK capable of producing up to 36 Leopard 2 A8 NO tanks a year.

The legal framework for the IPO has been in place since 2 June, and the annual accounts are ready for review. But the auditor impasse and the ownership puzzle show no signs of a near-term resolution. Management expects 20% revenue growth this year and sees the listing as a way to fund the capacity and technology investments needed to sustain that pace. Whether investors will accept the governance concessions at the revised valuation range will determine whether KNDS can pull off the landmark flotation — or whether the market waits for a structure that truly resembles a normal company rather than a state-controlled bond.

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