05 Sep 19. Reuters reports today that sources suggest that KKR is to sell or float German defence supplier Hensoldt. Private equity firm KKR (KKR.N) is preparing for a stock market flotation or sale of German defence supplier Hensoldt in a potential 2bn euro (£1. bn) deal, people close to the matter said.
The buyout group has in recent weeks listened to bankers present options for exiting its investment, including a listing of 20-30% on the stock exchange or a sale to a defence group or private equity business next year, they said, adding KKR was expected to hire an adviser soon to help arrange a deal.
KKR declined to comment.
The investor bought Airbus’s (AIR.PA) defence electronics business for 1.1bn euros in 2016 and later rebranded it Hensoldt, naming it after a 19th century German maker of binoculars and telescopes. The business comprises military sensors, electronic warfare equipment, avionics and optronics. It employs 4,400 staff and has annual sales of 1.1 billion euros.
Hensoldt has said it intends to double its revenues by 2022, benefiting from an expected European military spending spree.
Hensoldt’s high-tech cameras are used in products including Tornado fighter jets that fly surveillance missions over Syria and Iraq, while it also supplies radars for Eurofighter jets as well as periscopes for submarines and Leopard and Puma tanks.
The company also supplies identification systems for combat jets, night vision devices, radars for civil air traffic control and systems for civil and military efforts to counter drones.
Hensoldt is set to benefit from equipping the new Franco-German fighter jet, currently Europe’s largest defence project, which will replace Eurofighter and Rafale jets from 2040.
The group is also expected to pitch for contracts to supply the German navy’s new multi-purpose combat ship 180 and the German army’s new missile defence system.
BATTLESPACE Comment: This is an interesting move coming at a time of consolidation in the defence companies across the world following on from the L3/Harris merger. Certainly in optics and EO/IR there is strong competition from Chin and Israel in particular. EO/IR technology is on the cusp of new technology developments with SWIR coming into the mix and longer range HD systems and cores being launched at DSEI next week. These systems require big investments and KKR may see this as befitting a different structure.
It has beefed up its radar division with the acquisition of Kelvin Hughes and has been winning good orders.
The takeover of American Panel by Mercury Systems Inc. was s mart move as AP has access to LG’s advanced display technologies which are required for the new range of 10 bit displays needed for the new longer range cameras and detectors
Who would bid for Hensoldt if it isn’t floated? In earlier years it would fit very well with FLIR who has both EO/IR and radar segments, but FLIR is looking more to AI and drone acquisitions. Thales is looking at technology acquisitions and Leonardo is reported to be looking at European consolidation. The most likely bidders would be Safran or Rheinmettal both of which which have the money and the technology to bid for Hensoldt to create a European optics/radar powerhouse to rival US, Chinese and Israeli companies such as Elbit. L3Harris could bid but they are working on consolidating the business as is UTC with the current Raytheon merger. It could also trigger further consolidations and sales, perhaps the Thales optics unit could follow? Elbit has already gobbled up the former ITT night vision division.