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Frankfurt Stock Exchange: Dipped in Renk orange

Photo: STAFF / REUTERS

The defense supplier Renk has returned to the stock market on the second attempt. The first price for the shares was recorded in Frankfurt at 17.50 euros, which is 17 percent more than the issue price of 15 euros. Renk is valued at 1.75 billion euros at the first price.

The financial investor Triton placed 33.3 million Renk shares for 500 million euros with institutional investors within just two days. The “Leopard 2” tank manufacturer KNDS (KMW+Nexter Defense Systems) alone subscribed for shares worth 100 million euros. The major customer now holds 6.7 percent of Renk.

Investment bankers celebrated the comeback on the stock exchange board of the Frankfurt Stock Exchange, which was lit orange in Renk's company color. The shares of the 150-year-old traditional company rose to 18.99 euros. “The trust of our investors and the megatrends of the turnaround and energy transition give us additional tailwind,” said CEO Susanne Wiegand.

Renk builds large gearboxes and is currently experiencing a boom due to the upgrade. Thanks, among other things, to the “turning point” in arms policy proclaimed by Chancellor Olaf Scholz, company boss Susanne Wiegand wants to turn Renk into a billion-dollar company. However, Wiegand had also criticized German procurement policy, saying that industrial policy should also be taken into account.

German fund companies are still cautious about defense stocks

Gearboxes for tanks and ships for the navy account for 70 percent of the 2022 sales of almost 850 million euros, while the rest comes from civilian business, for example with gearboxes for compressors. CEO Susanne Wiegand wants to increase sales to one billion euros.

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Financial investor Triton reduced its stake to 66.6 percent by placing Renk shares with institutional investors. The issue was increased by 50 million euros at the last minute due to high demand. The US asset manager Wellington, one of the largest arms investors in the world, invested 50 million euros in Renk shares. German fund companies are still shying away from defense stocks because of their strict ESG guidelines, a banker said. "But Germany needs to invest more in defense, and the always skeptical German investors are now thinking more about it."

However, Renk only succeeded in going public on the second attempt. In October, the company had to cancel its IPO at the last minute. According to Renk, a market environment that had become “noticeably cloudy” had spooked investors.

Now, however, demand - especially from long-term investors - has significantly exceeded the issue volume, as Heiko Leopold from Deutsche Bank, who helped organize the IPO, said. The now rising price due to the stock market comeback also suggests that the mood is now significantly better.

Model for further IPOs?

A successful IPO could also encourage other candidates to take this step. In Frankfurt, the cosmetics group Douglas is expected to return to the stock exchange in the first quarter, which could bring billions in proceeds for the company and its owner, the financial investor CVC. CVC also has a stake in the fuel card provider DKV Mobility, which also stopped its IPO plans in the fall. The long-distance bus provider Flix has also intensified its preparations for an IPO.

Renk is valued at 1.75 billion euros at the first price. The financial investor Triton bought the former MAN subsidiary Renk from the Volkswagen Group just over three years ago and took it off the stock exchange. Under the aegis of Triton, the company also made the leap into the US market through an acquisition. "Today's step onto the trading floor underlines the successful development that Renk has demonstrated in recent years," said Triton manager Claus von Hermann, who chairs Renk's supervisory board.

April/Reuters