Berlin (AFP) - France and Germany announced Monday a deal for the joint governance of arms maker KNDS, paving the way for a blockbuster share offering as they seek to reinvigorate faltering European defence cooperation.

The agreement envisages Berlin taking a stake in the Franco-German defence group to put it on a equal footing with Paris, at a time when the continent is contending with a hostile Russia and worsening US ties.

Amsterdam-headquartered KNDS has a portfolio ranging from Leopard 2 and Leclerc tanks to artillery and armoured vehicles, and is a key supplier to European militaries.

The announcement comes just weeks after the collapse of the Franco-German FCAS project to build a next-generation fighter jet, which dealt a severe setback to efforts to strengthen Europe-wide defence initiatives.

“Together with Germany, we are today taking a major step toward sovereignty in our defence,” said French President Emmanuel Macron on X, after Monday’s announcement.

“By strengthening KNDS together, we are giving our armed forces the means to defend themselves, to produce, and to innovate on their own. A sovereign Europe that protects and chooses its own destiny.”

KNDS, created in 2015 through a merger of French and German companies, is currently half-owned by the French government via a holding company, with the rest of the shares owned by the Wegmann family of Germany.

The German owners are seeking to sell their stake and have been negotiating with the German government.

But talks were slowed down due to disagreement over the price, as well as squabbles within the government over how big the stake should be.

Berlin finally announced in May that it would seek to acquire a 40-percent holding when the company goes public.

In Monday’s announcement Berlin and Paris said they were aiming to ultimately hold equal stakes in the group.

- ‘Backbone’ of German defence -

Berlin has repeatedly stressed it is crucial for it to gain more influence over KNDS.

A confidential German defence ministry document, which was circulated to lawmakers and seen by AFP, said land systems produced by KNDS “form the backbone of the armoured units of the German military and thus of Germany’s defence capability”.

“Germany therefore has a vital security interest in ensuring that these key technologies of KNDS continue to be retained in Germany,” it said.

The deal removes an obstacle to KNDS moving forward with its stock market listing, as all sides wanted to ensure there was clarity over the future share-holding structure among the main investors.

The expected dual listing in Paris and Frankfurt is one of Europe’s most hotly anticipated IPOs of the year, and will help KNDS raise funds for its rapid expansion.

The company has previously voiced frustration at alleged foot-dragging by the German government, which reports say has threatened to delay a listing that could value the company at 15 to 20 billion euros ($17-23 billion).

KNDS is a key player in a joint Franco-German project to develop a new battle tank, dubbed the Main Ground Combat System (MGCS) initiative.

The agreement Monday and subsequent IPO boost the chances that this delayed programme might go ahead, after the FCAS failure fuelled fears it might also be scrapped.

KNDS is hoping to launch the IPO in July, according to the confidential German defence ministry document.

But the ministry acknowledged the schedule is tight.

Parliament’s budget committee will have to approve Berlin’s stake acquisition when it meets on Wednesday for the IPO to proceed next month, it said.

The committee has to sign off on any substantial defence procurements.

The ministry also noted that “agreement with the Wegmann family on the purchase contract must be reached”.

Multiple regulatory approvals for the IPO are also needed and there is a risk they might not be ready in time, it said.