German government in talks to buy 50% of KNDS, source says

BERLIN, Oct 14 (Reuters) - The German government is in talks to acquire a 50% stake in Franco-German tank maker KNDS from its German owner families, a person close to the matter said, after conditions for an initial public offering deteriorated this year.

Negotiations with the families, organised in the Wegmann Holding company, are ongoing, with the parties not far apart on purchase price, the person told Reuters.

German business daily Handelsblatt reported on Wednesday that a decision is expected in the coming weeks.

Plans for a KNDS initial public offering have been put on hold, the first source and another person close to the matter told Reuters.

The listing of KNDS, which makes the Leopard 2 tank among others, would have been among the European defence sector's largest IPOs in recent years. 

Under that plan, the company's family owners and the French state, which both hold 50% of the shares, were to sell 10% stakes to investors, with the families' remaining 40% being sold to the German state.

The German economy ministry said on Wednesday that the government is considering acquiring a stake on an equal footing with France to protect key defence industry technology.

"The decision regarding the purchase and sale of shares rests with the shareholders," a ministry spokesperson said in an emailed statement.

KNDS declined to comment on discussions between the owner families and Germany. A company spokesperson would only say that an IPO remains the company's objective.

The families declined to comment.

(Reporting by Florence Loève, Alexander Hübner, Sabine Siebold and Kirsti KnolleWriting by Thomas SeythalEditing by Sabine Wollrab and David Goodman)