Report: Fincantieri Seeks Share of TKMS to Create Leading Naval Shipbuilder

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06-Jun-2024

Italian shipbuilder Fincantieri is reportedly meeting with members of the German government proposing a combination with Thyssen-Krupp Marine Systems (TKMS) according to a report yesterday in the German newspaper Handelsblatt. The report says that previous approaches were rejected but that it is now being presented as an alternative to the negotiations for U.S. private equity firm Carlyle to take a majority stake in the German shipbuilder.

German industrial giant Thyssenkrupp confirmed in March 2024 that it is entering into a due diligence with Carlyle to acquire a partial stake in the company’s naval shipbuilding operations as one of several options for the unit. The parent company has been seeking a route to divest the shipbuilding operation but has encountered problems due to its perceived strategic role in defense. The company operates the largest shipyard in Germany employing around 3,100 people at its facilities in Kiel in addition to smaller facilities in Hamburg, Bremen, and Emden. It also has an agreement with the government to expand operations taking over a portion of the former MV Werften yards after leasing the building hall in Wismar to finish the incomplete cruise ship acquired by Disney.

TKMS is a major supplier to Germany as well as an international shipbuilder for navies in Norway, Egypt, and Singapore. They are also working on an agreement with India for a joint program to build submarines for the Indian Navy. It is considered to be one of the world’s leaders in the construction of conventional submarines.

The parent company has been reported to be negotiating a deal whereby Carlyle would acquire a majority stake in the shipyard operations of a newly spun-off company. Protections would be provided to Germany by having the German federal government acquire as much as a quarter of the company with Thyssenkrupp continuing as a minority shareholder. After announcing an agreement in March to proceed with negotiations, the parent company noted that the agreement with Carlyle did not rule out a parallel examination of other options including turning to the capital markets.

Fincantieri among others has reportedly also made proposals but they were rejected for various reasons including concerns over national interests. A reported proposal from the French Naval Group, known as a leading developed of submarines, was reportedly rejected in Germany because of concerns about intellectual property and jobs.

Handelsblatt reports an alternative proposal calls for using TKMS as the lead in an effort to consolidate the German naval shipyards. It is suggested that it could merge or acquire smaller German builders and then look to partner with a European company. 

Fincantieri, which in recent years has expanded its work on naval surface vessels, reportedly is presenting itself as the strongest partner to assist in the consolidation concept. Fincantieri is also believed to be looking for an avenue into the submarine sector. 

The report says that the company met with government officials saying it was open to different approaches but it might acquire a stake in TKMS or possibly invest alongside Carlyle. Thyssenkrupp reportedly rejected several previous proposals going back at least a year from the Italians. It is believed that they are continuing to work on the due diligence with Carlyle and negotiations with the federal government on the structure of a deal.
 

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