Berlin considers stake in Thyssenkrupp marine unit to accelerate spin-off

Germany’s federal government is considering taking a stake in the submarine-building arm of Thyssenkrupp as it seeks to accelerate the spin-off of the military contractor from its ailing parent.

German defence minister Boris Pistorius on Tuesday said the government was “thinking about” investing in Thyssenkrupp Marine Systems (TKMS) and its shipyard in Kiel, as he attended an event at the site.

Thyssenkrupp revived old plans to spin off its naval unit in March. The conglomerate, which once symbolised Germany’s engineering might, is gradually selling off most of its assets after years of underperformance.

Several private equity groups have expressed an interest in TKMS, the Financial Times reported in March. However, a person close to the negotiations said they had been deterred by the challenge of taking on a company where each order can amount to several billion euros.

Such an operation needs a partner that can generate cash as a guarantee against problems during the building process. It was that role the German government was considering assuming, the person close to the negotiations said.

An investment would not be the first by Germany’s government in a domestic defence company. In 2021, the state-owned development bank KfW took a 25.1 per cent stake in sensor and radar maker Hensoldt, granting Berlin a blocking minority under German law.

Russia’s invasion of Ukraine has led to a revival for Europe’s defence companies — a sector that was not long ago largely ignored by investors. Renk, the Augsburg-based maker of gearboxes for tanks, on Tuesday announced plans to list in Frankfurt, as the company sought to tap into the newfound interest in the industry.

TKMS on Tuesday started construction of six custom-designed 212CD submarines, worth €5.5bn in total, that when ordered jointly by the German and Norwegian navy two years ago, represented the biggest order in the company’s history.

Construction of the shipmaking hall for the boats alone took two years. Oliver Burkhard, TKMS’s chief executive, said he expected the first submarine to reach the Norwegian navy in 2029, while the next two boats would be delivered to the German navy in 2032 and 2034 respectively.

Thyssenkrupp, which traces its origins back to 1811, is in the final phase of a restructuring to pay down debt. Over the past three years the Essen-based group has sold its car parts and infrastructure businesses, an Italian stainless steel plant and its elevator operations, which it sold for €17bn in 2020 to private equity.

Miguel Ángel López Borrego, a former Siemens executive, took over as chief of the group in June, after Martina Merz was pushed out by the board. She was ousted in part because of the slow progress of her efforts to sell TKMS and the steel business.