German Government Still in Talks With Thyssenkrupp Over Naval Spin-Off

The business daily Handelsblatt, citing government sources, had reported that the chancellery as well as the ministries involved had agreed not to push for state involvement at this time, something Thyssenkrupp’s labor leaders have called for.

“We are in talks to protect the security interests of the federal government,” said a defense ministry spokesperson at a regular government news conference in Berlin.

“TKMS has the relevant technologies and is of particular importance to us, to our navy. That is why we are monitoring the situation and looking closely at what is happening there.”

In an emailed statement, another defense ministry spokesperson said talks were ongoing in light of Berlin’s interests, but declined to give details, citing confidentiality.

A spokesperson for Thyssenkrupp said the company was in constructive discussions with the government over TKMS, which makes frigates, submarines and sensor technology, “but we do not wish to pre-empt the outcome of these discussions.”

Thyssenkrupp has said in the past that government participation was no precondition for any divestment of TKMS and that a planned spin-off of the business – expected to take place by the end of the year – would go ahead regardless.

Chairman Siegfried Russwurm said last month that talks about the government participating to safeguard Germany’s national interest were unnecessary given that Berlin is either a customer or must approve equipment sales to other countries.

When asked for comment, Germany’s economy ministry referred to the defense ministry.

The government will instead seek a “security agreement” to ensure that national defense and jobs are not at risk from the spin-off, which would involve regular consultations, Handelsblatt reported.

The agreement would also include a right of first refusal for the government if a strategic investor wanted to buy into TKMS, though that is not expected, the paper said.

Thyssenkrupp shareholders will vote on the plan to spin off a 49% stake in TKMS at an extraordinary general meeting on August 8.

The spin-off plans come as defense stocks are boosted by higher military spending in Europe amid fears of dwindling U.S. support.

Thyssenkrupp shares were up 6.8% at 1237 GMT.

RAG Stiftung, a state-owned industrial trust, separately said in a press conference that it would look into investing in TKMS if the opportunity arose, but not as an anchor investor.

(Reporting by Anneli Palmen and Tom Kaeckenhoff. Additional reporting by Matthias Inverardi. Writing by Miranda Murray, Christoph Steitz and Matthias Williams. Editing by Lincoln Feast, Mark Potter and Ludwig Burger)