Il Nuovo Postiglione - French-German tank maker KNDS fires starting gun on mega-IPO

The listing will consist of 20 percent of its shares -- expected to go entirely to institutional, not retail investors -- with the French and German governments to own the rest of the firm.

Earlier this week, Paris and Berlin hammered out an agreement to hold equal stakes in the maker of Leopard and Leclerc tanks as well as other crucial land systems, paving the way for the listing.

KNDS is looking to raise cash for its rapid expansion as European militaries rearm to face an increasingly hostile Russia and amid worries over US security commitments to the continent.

Reports have said the stock sale will value the company at 15 to 20 billion euros ($17-$23 billion).

"Europe is entering a new era of defence and security," KNDS chief executive Jean-Paul Alary said in a statement. "Armed forces are modernising at speed and rebuilding critical land defence capabilities.

"The planned IPO is a natural next step for KNDS."

The company, formed in 2015 through a French-German merger, did not give a precise date for its initial public offering of shares, but Alary told reporters on a call it was expected in the coming weeks.

A key hurdle to the listing was removed with the deal between Paris and Berlin, which gave clarity about who will be the key shareholders in the strategically important company.

The agreement also aimed to highlight European unity on defence cooperation, which suffered a serious setback this month when the next-generation FCAS fighter jet, to be developed by France, Germany and Spain, was ditched.

- 'Backbone' of German defence -

Currently, the French government owns half of KNDS while the rest is controlled by the Wegmann family in Germany.

The family has struck a deal to sell its holding to the German government, which wants to exert more influence over the group, with France and Germany both due to hold 40 percent stakes when the IPO is launched.

The remaining 20 percent will be sold on the stock market.

But KNDS said these shares would probably be sold in "private placements to institutional investors in various jurisdictions".

"No public offering is expected to take place in any jurisdiction," it added.

The listing is set to be one of Europe's biggest in 2026 and the largest from the region's defence sector in years, underscoring investor buzz around arms makers.

Still, there could be a race to the finish line, as the German parliament's budget committee still needs to sign off on Berlin's stake acquisition in the coming days.

A parliamentary source told AFP that a special session of the committee was expected on Friday.

The German defence ministry, in a document circulated to lawmakers and seen by AFP, said that KNDS land systems "form the backbone of the armoured units of the German military and thus of Germany's defence capability".

As well as being a key supplier to European armies, KNDS has a central role in a French-German project to develop a new battle tank, dubbed the Main Ground Combat System (MGCS).

The IPO could boost the chances that this delayed programme goes ahead, after the FCAS failure fuelled fears it might also be scrapped.

E.Spicuzza--INP