Thyssenkrupp to list marine defense unit amid rising European military spending

[a sign of the headquarters of ThyssenKrupp]
Teka77/iStock Editorial via Getty Images

Thyssenkrupp’s (OTCPK:TYEKF [https://seekingalpha.com/symbol/TYEKF]) (OTCPK:TKAMY [https://seekingalpha.com/symbol/TKAMY]) naval defense arm, Thyssenkrupp Marine Systems (TKMS), will begin trading on the Frankfurt Stock Exchange next Monday, marking the completion of a long-planned spinoff as Europe accelerates investment in submarine and maritime defense programs.

The German industrial group said the listing finalizes the separation of a minority stake in TKMS, with Thyssenkrupp retaining 51% ownership following shareholder approval in August. The company did not disclose a valuation for the new entity, though analysts at Citi estimate TKMS could be worth around €3.4 billion ($3.9 billion) or more.

TKMS expects the market for naval defense systems to grow to about €61 billion by 2033, fueled by increased demand for submarines, surface ships, and protection of undersea infrastructure. Chief Executive Oliver Burkhard said last month that European nations are expanding their maritime capabilities to counter new threats such as sabotage of underwater cables. The company reported an order backlog exceeding €18 billion as of June.

Germany’s defense expenditure is projected to rise substantially over the next several years as a share of GDP, with consultants at Pantheon Macroeconomics estimating that the country will spend several hundred billion euros more annually in the medium term. Other major European powers, including France and the U.K., have also pledged higher defense budgets in response to Russia’s invasion of Ukraine and ongoing global tensions.

That surge in spending has driven a rally in European defense stocks this year — with shares of Rheinmetall (OTCPK:RNMBF [https://seekingalpha.com/symbol/RNMBF]) (OTCPK:RNMBY [https://seekingalpha.com/symbol/RNMBY]) and Leonardo (OTCPK:FINMF [https://seekingalpha.com/symbol/FINMF]) (OTCPK:FINMY [https://seekingalpha.com/symbol/FINMY]) both more than doubling.

As part of the spinoff, Thyssenkrupp (OTCPK:TYEKF [https://seekingalpha.com/symbol/TYEKF]) (OTCPK:TKAMY [https://seekingalpha.com/symbol/TKAMY]) shareholders will receive one TKMS share for every 20 shares held in the parent company.

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