The armaments electronics group Hensoldt is now on the stock exchange. The future prospects are good, because many countries around the world want to increase armaments spending – the German government has big plans too. Nevertheless, the stock market debut was sobering.
Today’s IPO of the Bavarian defense electronics manufacturer Hensoldt brings in around 460 million euros. The company allocated 38.3 million shares at EUR 12.00 each. The share was thus already at the lower end of the price range, which reached up to EUR 16.00.
The first day of trading was disappointing. After an initial Xetra price of 12 euros, exactly the same as the issue price, it went down to 10.57 euros. The share then recovered somewhat and closed at eleven euros.
The stock market launch of the motorhome manufacturer Knaus Tabbert also did not meet expectations on Wednesday. The Hensoldt management and, above all, the owner KKR had reason to raise their hopes.
Further course information on Hensoldt
Long-term strategic relationships
Because armaments companies like Hensoldt or Rheinmetall live in golden times. Governments around the world are spending ever increasing amounts on the military. The current goal of the NATO countries, for example, is armaments expenditure of two percent of the gross national product. Germany does not achieve the goal, although federal military spending is the second largest budget item after labor and social affairs.
In particular, US President Trump had frequently vehemently called for compliance with the target and even demanded a doubling to four percent. The management of Hensoldt should judge this demand benevolently, because the Bundeswehr is naturally an important customer. Hensoldt makes 43 percent of sales in Germany. The currently most important major order is the modernization of the radar of the German and Spanish Eurofighter fleets, which should bring the company 1.4 billion.
Further course information on Rheinmetall
Hensoldt benefits from long-term and close strategic relationships with the German government and foreign governments, as well as from contacts with supranational organizations such as NATO, says CEO Thomas Muller.
Secure borders, airports, nature reserves …
In addition to the positive boom for weapon systems, at least for the branch, Hensoldt is active in a particularly fast-growing segment: armament electronics. According to the company, growth should be six percent annually until 2024.
For example, Hensoldt manufactures radar systems and drones, optical systems for tanks, and Hensoldt offers periscopes for the navy. In addition, there are "solutions for the increasing need to protect civil facilities and critical infrastructure". Hensoldt names the protection of borders, airports and energy supply as examples. The management does not even forget to mention the possible safeguarding of nature reserves. So you are prepared for many scenarios.
In the first half of the current year, Hensoldt achieved sales of 440 million euros with 5,400 employees, an increase of six percent compared to the previous year. In 2019 as a whole, sales totaled 1.1 billion euros. In 2021, revenues are expected to be between 1.4 and 1.6 billion.
The lion’s share is used to pay off debts
"With the tailwind from the IPO, we are now taking a big step towards strengthening our position as Europe’s largest platform-independent provider of sensor solutions in the defense and security sector with global reach," said CEO Thomas Muller.
And this is how it is expressed in numbers: Of the 460 million that are raised, 300 million euros go to the company. They are primarily intended to be used to repay debt. The rest goes to the owner KKR. KKR is a US financial investor that acquired the former Airbus radar division in 2017. 37 percent of the shares will in future be in free float.
Blocking minority of the federal government
In order to be able to represent German security interests in the company, the federal government had already secured the option in a "security agreement" with the sale to KKR of being able to get into Hensoldt with up to 25.1 percent, the blocking minority, in order to have strategic influence on the Secure manufacturers of sensors, radar systems and systems for electronic warfare.
The agreement also applies after the IPO, as Hensoldt announced. By the end of the year, the federal government would have to pay KKR a flat rate of 600 million euros for a blocking minority of 25.1 percent. He can then access the average market price if KKR drops its stake to less than 25 percent.
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Source: boerse.ard.de