TKMS, the German warship manufacturer which has spun out from parent group Thyssenkrupp, plans to capitalize on the expected surge in Europe’s defense spend with “prudent, margin-oriented growth” after debuting on Frankfurt’s stock exchange Monday.
The initial public offering saw TKMS launch at around 60 euros ($70) per share — giving it a market value of around 3.8 billion euros ($4.4 billion) — drawing strong demand from investors. Industrial engineering giant Thyssenkrupp will continue to hold a 51% stake in the company following the offering.
The company, also known as Thyssenkrupp Marine Services, builds both submarines and surface vessels, as well as electronics and software technology, which TKMS CEO Oliver Burkhard called the “jewel in the chest box” of the company.
This includes sonar equipment and certain autonomous devices, which are critical in the so-called ‘mighty domain’ operations “which is the next big thing in military warfare,” Burkhard told CNBC’s “Europe Early Edition” on Monday.
The IPO will enable the company to raise capital and expand capacity amid an anticipated ramp-up in demand for stronger defense capability, particularly in the naval sector, in Europe in the coming decades.
The U.S. has 71 submarines, while Russia has an estimated 64. Germany, by comparison, has just six, and has ordered six more.
Burkhard said TKMS has an order backlog of 18.6 billion euros, which will mean the company will likely remain at full capacity towards 2040, with one submarine typically taking between 5 and 15 years to build.
TKMS has doubled its capacity in recent years, and now has two shipyards where it can build state-of-the-art submarines, which can remain underwater for weeks at a time.
“With that capacity we’re having, we can of course build our order book and we can also take on other orders,” Burkhard said, adding that the firm is targeting “prudent, margin-oriented growth.”
The company benefits from a “robust” supply chain, about 90% of which is in Europe, mostly in Germany, he said.
Thyssenkrupp’s shares were last trading 6.4% higher. The Stoxx Europe Aerospace and Defense index advanced about 2.7%, with battle tank parts maker Renk gaining 6.5%, defense technology firm Hensoldt rising 7.9%, and Rheinmetall notching a gain of 5.8%.
Gareth McCartney, global co-head of equity capital markets at UBS, said TKMS’ public debut comes at a time when investors are sitting on considerable liquidity, and have demonstrated a solid appetite for IPOs in the region.
“We now have a catalyst over the last few months with both defense and infrastructure spending very much at the core of what international investors are looking for when they look towards investing in Europe,” McCartney told CNBC’s “Europe Early Edition” on Monday.
