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Spectator
a day ago
- Business
- Spectator
The problem of striking a defence deal with the EU
The UK-EU summit in London in May at which a new relationship between the parties was agreed seems a long time ago now. In fact, it is barely eight weeks, but we live in a world which has supercharged Harold Wilson's mordant dictum that 'a week is a long time in politics'. They seem like aeons now. One major subject at the summit was the EU's financial instrument Security Action for Europe (Safe). This is a fund of €150 billion (£130 billion) which will provide loans for member states to undertake urgent, large-scale defence procurement projects, with the aim of addressing capability gaps and boosting the European defence industry's production capacity. However, Brussels makes clear that 'beneficiary member states will have to carry out, in principle, common procurements involving at least two participating countries to qualify for the loans'. It is now clear that the UK will need to pay a fee to participate in this scheme. The amount has not yet been fixed, but EU diplomats reason that 'since British businesses would receive EU money to create jobs and expand capacity under the scheme, London should recompense Brussels'. France is said to be pushing for a significant contribution, while others, including Germany, are keen not to set the tariff so high that the UK does not participate at all. This should come as no surprise. The prima facie terms of the Safe scheme, initially excluding the US and the UK (between them home to ten of the world's twenty biggest defence contractors), left French and German manufacturers like Thales, Rheinmetall and KNDS at the head of the queue to benefit from new spending. Thales and KNDS, as well as Naval Group and Safran, are, as it happens, part-owned by the French state. In these circumstances, the question of who benefits was not a particularly challenging one. Surely this wasn't supposed to happen? At the summit in May, Sir Keir Starmer said that the UK-EU agreement would 'open the door to working with the EU's new defence fund – providing new opportunities for our defence industry, supporting British jobs and livelihoods'. That was, I argued at the time, one of the main motivating factors behind the agreement. After all, the rules for Safe make it clear: Safe will also allow acceding countries, candidate countries, potential candidates and countries that have signed a security and defence partnership with the EU, such as the United Kingdom, to join common procurements. Alas, there was a brief cautionary note that Britain's participation would be 'subject to a separate negotiation and conditions, including a financial contribution from the UK'. The European Commission's spokesman for defence, Thomas Regnier, told the Financial Times that, under the terms of the agreement, UK-based companies could provide up to 35 per cent of the value of procurement through Safe, but going beyond that would depend on 'an agreement with the EU on the precise modalities on aspects such as budget contribution and security of supply'. This was inevitable. The EU is a fundamentally protectionist organisation which seeks to gain as much advantage as possible for the economies of its member states. That is not a criticism, merely an observation: but it has highlighted the disadvantages of pursuing defence policy through the EU, of which we are not a member, rather than Nato, a dedicated military alliance of which we have been part for more than 75 years. (It is true the overlap between the EU and Nato is not complete: although acting through the latter would include the US, Canada and Turkey, it would exclude the military superpowers of Austria, Ireland, Malta and Cyprus.) The Cabinet Office has offered bland, reality-defying reassurance: 'It is in all our interests for the UK and EU to bring together our unique capabilities and expertise to make Europe a safer, more secure, and more prosperous place'. Indeed so, but perhaps that is a message better directed towards the French government, while there still is one. There have been pious expressions of hope that 'parochial national interests' do not undermine Safe's potential to contribute to Europe's overall security. But this is the EU, the bare-knuckle fight club of national interests. It has weak defence institutions but strong ambitions to accrete more competencies to the centre. And the hard-edged realpolitik of Brussels is showing the relative emptiness of the clutch of bilateral agreements Starmer has concluded. There is a clear choice. What is Europe's overriding priority: building the continent's defence capabilities or strengthening national defence industrial bases? The rules governing Safe effectively choose the latter; that is a matter for member states. But perhaps the British government should not have so eagerly chased a mechanism that was bound to work to our disadvantage. The Strategic Defence Review set out a 'Nato First' policy – perhaps we should have focused more closely on that mantra.
Yahoo
7 days ago
- Business
- Yahoo
KNDS owners explore IPO or stake sale amid defense sector interest
-- The German family shareholders of KNDS NV are looking to reduce their ownership in the European tankmaker through either a public listing or stake sale, as investor interest in defense companies grows, according to a Bloomberg report on Wednesday. The family members behind Krauss-Maffei Wegmann, which merged with France's Nexter to create KNDS, have reportedly notified the German government about their plans to sell part of their 50% stake. They are considering options including an initial public offering (IPO) and partial divestment. Berlin is in early stages of examining the purchase of a blocking minority of 25.1%. Several private equity firms, Middle Eastern wealth funds, German asset managers and family offices have shown early interest in acquiring a stake in the Franco-German land defense group. Investment firms including Advent, CVC Capital Partners Plc, KKR & Co (NYSE:KKR). and Warburg Pincus have begun preliminary discussions about a potential investment. An IPO remains the preferred option for KNDS owners to partially cash out their stake. They have been discussing with potential advisers about a listing that could happen next year, potentially valuing the defense company at €20 billion ($23 billion) or more. If they pursue a listing, the German family shareholders and the French government, which controls the other 50%, might each sell slightly more than 10% of their stakes. At the same time, the German families, including the Bode and Braunbehrens clans, are receiving interest from financial investors as they seek to reduce their stake further. The family shareholders might also consider interest from large industry peers like Rheinmetall (ETR:RHMG) AG. Any new shareholders would likely need approval from the German government. If an IPO or stake sale doesn't materialize, the German family owners might even consider breaking up the company to facilitate an eventual exit. This would undo the 2015 merger of Krauss-Maffei Wegmann and Nexter. This option is currently viewed only as a backup plan but might be favored by some German lawmakers and labor unions while giving the family more flexibility to sell their stake. The final decision is complicated by the German-French ownership structure, with both sides able to block strategic changes, and differences among some individual family members. Related articles KNDS owners explore IPO or stake sale amid defense sector interest Victoria's Secret Exposed: The Warning Sign Behind the Stock's 52% Collapse Buy this massive AI stock into upcoming Q2 print: Morgan Stanley
Bloomberg
7 days ago
- Business
- Bloomberg
Tankmaker KNDS Explores IPO, Stake Sale as Buyout Firms Circle
The German family shareholders of KNDS NV aim to reduce their ownership in the European tankmaker through a listing or stake sale to tap growing investor demand in defense companies, people with knowledge of the matter said. The family members behind Krauss-Maffei Wegmann, which merged with France's Nexter to create KNDS, have informed the German government that they're considering selling part of their 50% stake and looking at options including an IPO and partial divestment, said the people. As part of this, Berlin is in the early stages of studying the purchase of a blocking minority of 25.1%, according to some of the people.
Bloomberg
10-07-2025
- Business
- Bloomberg
Leonardo Makes €1.6 Billion Bid For Iveco Defense Unit Amid Political Pressure
Updated on Save Leonardo SpA made the lowest offer for Iveco Group NV 's defense unit amid political pressure to keep the business in Italian hands, according to people familiar with the matter. The Rome-based defense company bid about €1.6 billion ($1.9 billion) including debt before last week's deadline, the people said. That trailed rival proposals from Franco-German tankmaker KNDS NV, which offered closer to €1.9 billion, and Czechoslovak Group SA, some of the people said, asking not to be identified because negotiations are private.
Time of India
19-06-2025
- Business
- Time of India
Tried and tested in war: For European drone manufacturers, Ukraine is the place to be
About once a month, French drone manufacturer Henri Seydoux makes what has become a necessary pilgrimage for many in his business - he goes to Ukraine . Because for drone technology, there is no harder place to survive than the frontlines of the war against Russia's invasion, where both sides are using unmanned aerial machines of all shapes and sizes to kill and to observe, reshaping modern warfare. And because the battlefields also bristle with electronic countermeasures and weapons to confuse, jam and shoot down drones , Ukraine has also become an extreme real-life proving ground for advances in drone technology, some of which has started to spill over into non-military sectors. For manufacturers, being able to say that their drones and related equipment have been battle-tried and tested by Ukrainian forces is becoming a sales pitch as they market their wares not just to national defense departments, but also to police forces, border authorities, rescue services and civilian users. "When we say, 'This is a good machine, it works,' people can believe us or not. But when it's guys in Ukraine and others saying they're happy, it has greater value," says Bastien Mancini , president and co-founder of French drone manufacturer Delair, which has teamed up with European defense contractor KNDS to supply Ukrainian forces with 100 exploding drones. KNDS' sales literature notes that they are "combat-proven." Mancini says civilian users of Delair's other non-military drones "see things that work in Ukraine and say to themselves, 'It resists jamming, it resists the loss of a radio connection and whatnot and so it's going to be fine for civilian use, like inspecting electric cables or whatever." "It really has helped us win markets. It gives people confidence," he told The Associated Press at the Paris Air Show, a major shop-window for the aviation and defense industries. 'Drones saved Ukraine' Henri Seydoux, the founder and head of French drone maker Parrot , says Ukraine is "fascinating" from a drone-technology perspective because "it changes so quickly, there are new ideas non-stop." He's been making regular trips since the start of Russia's full-scale invasion in February 2022 to meet Ukrainian drone manufacturers, drone software developers and the military authorities. "Every quarter, the situation changes completely," he said in an interview. "Every company, let's say, that makes military equipment or every army is very interested by drones. But the ones that really use them and understand how to use them is the Ukrainians." For Ukraine, trying to defend against swarms of Russian drones that target cities and waves of drone-supported Russian troops is a matter of survival. So, too, is finding workarounds to counter electronic warfare systems that Russia deploys to jam and disable Ukrainian drones, igniting what has become a drone-technology arms race between the two sides and for manufacturers outside of Ukraine, too. Small drones that drop bombs and explode against targets - mass-produced at a fraction of the cost of other more complex weapons systems that its allies have supplied - have become increasingly vital for Ukraine's resistance. Its Defense Ministry has said that it plans to buy 4.5 million drones this year, all Ukrainian-made, that allow their operators to see what the machines see, so they can guide the flights in real time - exploding in a Russian trench, for example, or even against a single enemy soldier. That's three times more drones than the ministry bought last year, it says. "Drones saved Ukraine," said Alex Vorobei , the Ukrainian sales representative for Ailand Systems, a Ukrainian start-up developing a drone that detects land mines. Vorobei and others in the drone business say that manufacturers not involved in Ukraine risk being left behind. "If you're in the defense field and still not in Ukraine, it means you are nowhere," Vorobei said at the Paris show. Civilian uses for Ukrainian lessons A micro surveillance drone unveiled by Parrot at the Paris show has a nod to Ukraine in its name - the Anafi UKR - and also has been field-tested in what Seydoux describes as the "very harsh environment" on the frontline. It's equipped with artificial intelligence technology to enable it to find its way when radio and navigational signals are jammed. Parrot says the drone's ready-for-war resilience and features also make it a good fit for law enforcement operations, such as monitoring crowds, tracking suspects or keeping watch over borders, and for rescue services in remote areas or during fires and accidents when navigational signals might go down. Ukraine has been "a real laboratory or test for us, to see if our products worked," said Delair's Mancini. Its Oskar exploding drone, which has polystyrene wings, carries a half-kilogram (one pound) warhead to detonate against troops and lightly armored vehicles. Delair developed it in under a year, repurposing one of its civilian drones that was already used in France for mapping and inspecting power cables, and hardening it for Ukraine with technology to resist Russian jamming. "Five or 10 years ago, lots of people were asking themselves, 'Are drones really useful for something?' No one is asking that question today," he said.
