Thyssenkrupp Gets Nod For Naval Spinoff To Tap Defense Boom

By William Wilkes

(Bloomberg) –Thyssenkrupp AG is moving to cut loose its warship unit, hoping to ride a surge in European defense spending while stepping back from a business that has long been slow, costly, and hard to scale.

Shareholders on Friday approved the company’s plan to float a minority stake in Thyssenkrupp Marine Systems, which builds submarines and surface ships for the German navy and other customers worldwide. The listing will likely take place in October, the company said. Thyssenkrupp will retain a 51% stake in TKMS, enough to maintain control while unlocking value in a division poised to benefit from rising defense outlays.

“We are granting the company the entrepreneurial freedom to act faster, invest more strategically, and expand its leading position,” Chief Executive Officer Miguel Lopez said in comments at the meeting. The listing marks a step in his effort to dismantle the conglomerate and reshape it into a leaner industrial holding. 

Thyssenkrupp shares rose 3.2% at 3:16 p.m. in Frankfurt. The stock has more than doubled this year, bolstered by anticipation of higher defense spending.

The move comes as Germany plans to more than double its yearly defense budget to €162 ($188 billion) by 2029. A listing could pave the way for long-awaited consolidation in Europe’s fragmented naval industry and give investors a rare way to tap into rising military budgets—though few expect TKMS to replicate the stock market success of Rheinmetall AG, whose shares have surged nearly 1,700% since Russia’s invasion of Ukraine.

Lopez is positioning TKMS in line with his broader plan to transform Thyssenkrupp into a strategic holding company, built around majority stakes in standalone, globally competitive businesses. Defense shares have soared this year, with Bloomberg’s European Defense Index up nearly 75% and Rheinmetall rising 170%. Globally, the MSCI World Aerospace and Defense Index has climbed 44% in 2025, far outpacing the broader market.

For TKMS, the planned IPO marks the latest evolution of a business with deep industrial roots. The unit includes legacy shipyards such as Howaldtswerke-Deutsche Werft in Kiel and Atlas Elektronik, a specialist in underwater sensors, sonar systems, and naval robotics. Thyssenkrupp began pulling together its naval assets in 2002, and merged HDW, Blohm+Voss, and others under the TKMS umbrella by 2005.

Submarine contracts with Greece, South Korea, and Israel helped build TKMS’s reputation abroad. But momentum faded as its parent became consumed by mounting losses from an ill-fated expansion into US steel. With capital tight, reinvestment in shipbuilding stalled.

Technical delays and program setbacks followed. Greece’s first Type 214 submarine, Papanikolis, was delivered years behind schedule, souring diplomatic ties. Germany’s F125 Baden-Württemberg-class frigates were returned for rework after software issues, denting the company’s status as a standard-bearer of German engineering. By 2022, Thyssenkrupp had begun carving out the business for a spinoff.

Since then, demand has returned. TKMS’s backlog has grown to more than €18 billion, up from around €6 billion in 2020, fueled by orders for submarines, mine-hunting vessels, and other platforms from Germany, Norway, and NATO partners. A joint bid by TKMS and Naval Vessels Lürssen is  the only contender for Germany’s F127 air-defense frigate program.

Still, analysts caution that naval shipbuilding is structurally different from other parts of the defense market. Unlike Rheinmetall, which produces tanks and artillery systems at scale for a growing number of clients, TKMS operates in a world of bespoke platforms, lengthy build cycles, and complex export politics.

“Investors will need a lot more patience with TKMS,” said George Ferguson, a defense analyst at Bloomberg Intelligence. “Europe is ramping up spending, but most of that will go toward land and air systems—not ships.”

A merger that could have laid the groundwork for a pan-European naval champion — akin to Airbus in aerospace — now looks unlikely. Italian shipbuilder Fincantieri SpA held talks with Thyssenkrupp but walked away after Germany’s economy ministry raised concerns about foreign access to the company’s sensitive submarine know-how, particularly its quiet propulsion systems.

The proposed listing will increase the hurdles for mergers. The German government has secured veto rights and a board seat at TKMS as part of a deal ahead of any spinoff of the naval unit. Berlin can block any sale of a 25% stake or more and has first refusal if Thyssenkrupp tries to sell a 5% stake or more.

More globally, governments are tightening domestic content requirements in exchange for contracts. To meet those demands, TKMS maintains surface-ship capacity at two sites and submarine production across four, fragmenting operations and driving up costs.

Those headwinds were underscored this week when Japan’s Mitsubishi Heavy Industries beat out TKMS for a multibillion-euro Australian frigate contract. MHI will build 11 ships to replace the Anzac-class fleet, a win that buoys Tokyo’s ambitions as a global arms exporter. TKMS’s loss highlighted the growing competitiveness of international shipbuilding, even for Europe’s most established players.

“There’s a lot of breathless commentary around the listing, but it completely misunderstands how the naval sector works,” said Sash Tusa, defense analyst at Agency Partners. “This isn’t Rheinmetall. Naval programs are bespoke, slow, and politically sensitive — it’s not a scalable model.”

© 2025 Bloomberg L.P.

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