UPDATE 3-German government still in talks with Thyssenkrupp over naval spin-off, Berlin says

The German government is still in talks with Thyssenkrupp over a spin-off of its naval ship building division TKMS, a defence ministry spokesperson said on Wednesday, after a report said Berlin had no plans to take a stake.

The business daily Handelsblatt, citing government sources, had reported that the chancellery as well as the ministries involved had agreed not to push for state involvement at this time, something Thyssenkrupp's labour leaders have called for. "The German government has been following ThyssenKrupp AG's restructuring efforts from the beginning and is in discussions with the company, including to consider the interests of the federal government," the spokesperson said.

In a emailed statement, the spokesperson declined to give further details, citing confidentiality. A spokesperson for Thyssenkrupp said the company was engaged in constructive discussions with the government over TKMS, which makes frigates, submarines and sensor technology, "but we do not wish to pre-empt the outcome of these discussions".

Thyssenkrupp has said in the past that government participation was no precondition for any divestment of TKMS and that a planned spin-off of the business - expected to take place by the end of the year - would go ahead regardless. Chairman Siegfried Russwurm said last month that talks about the government participating to safeguard Germany's national interest were unnecessary given that Berlin is either a customer or must approve equipment sales to other countries.

When asked for comment, Germany's economy ministry referred to the defence ministry. The government will instead seek a "security agreement" to ensure that national defence and jobs are not at risk from the spin-off, which would involve regular consultations, Handelsblatt reported.

The agreement would also include a right of first refusal for the government if a strategic investor wanted to buy into TKMS, though that is not expected, the paper said. Thyssenkrupp shareholders will vote on the plan to spin off a 49% stake in TKMS at an extraordinary general meeting on August 8.

The spin-off plans come as defence stocks are boosted by higher military spending in Europe amid fears of dwindling U.S. support. Thyssenkrupp shares were up 6.8% at 0916 GMT.

RAG Stiftung, a state-owned industrial trust, separately said in a press conference that it would look into investing in TKMS if the opportunity arose, but not as an anchor investor.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)