Thyssenkrupp's Warship Arm to List Next Week as Group Eyes European Defense Cash — Update

By Joshua Kirby

Thyssenkrupp's naval-defense business will start trading on the German stock exchange next week as the industrial company looks to cash in on a European drive to expand its submarine fleet in the face of geopolitical tensions.

The listing on the Frankfurt exchange on Monday will conclude the spinoff of a minority stake of Thyssenkrupp Marine Systems, Thyssenkrupp said Tuesday. Under the spinoff, set out last year and approved by shareholders in August, Thyssenkrupp will retain a 51% stake in the business.

Thyssenkrupp didn't set out the new company's valuation, but it could be worth some 3.4 billion euros ($3.9 billion) and perhaps more, according to estimates from Citi.

"We see the marine business re-rating as a catalyst for Thyssenkrupp," the bank's analysts wrote in a recent research note.

TKMS is targeting a growing market for marine defense systems, one that could reach as much as 61 billion euros by 2033, according to the company. TKMS Chief Executive Oliver Burkhard said last month that the market will expand as Europe ramps up military spending to defend against new forms of warfare, such as damage to undersea cables. The company order book stands at more than 18 billion euros as of June.

In Germany, defense spending is set to climb as a proportion of total economic output. Europe's largest economy will spend some hundreds of billions of euros extra a year in the medium term, according to calculations by consultants Pantheon Macroeconomics.

Government of other European countries including France and the U.K. have similarly promised fresh cash for defense outlay in response to demands from Washington, and to Russia's war in Ukraine. Spurred also by geopolitical tensions in the Middle East, the anticipated defense drive has contributed to a surge in European defense stocks this year. Companies such as German ammunition maker Rheinmetall and Italy's Leonardo have seen their share price more than double since the start of the year.

Thyssenkrupp said shareholders will receive one share in TKMS for every 20 they hold in the parent company.

"We are facilitating growth opportunities and access to the capital market for TKMS, at the same time creating value for our shareholders," the group's Chief Executive Miguel Lopez said Tuesday.

Thyssenkrupp shares were down 1.7% at 12.67 euros in early European trade.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby