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UPDATE 2-Defence supplier Hensoldt prices IPO at low end of range

(Recasts first sentence to reflect pricing of IPO)

FRANKFURT, Sept 23 (Reuters) - Private equity-owned German defence supplier Hensoldt priced its initial public offering at 12 euros per share, at the low end of its marketing range, the company said on Wednesday.

Potential investors in Hensoldt, whose high-tech cameras are used in Tornado fighter jets, were guided to expect a price of 12 euros per share with books closing later on Wednesday and trading to start on Friday.

They had been offered in a 12-16 euros per share range, but bankers cited a rise in market volatility this week as a reason for risk-averse investors shying away from orders at a higher price.

Shares worth up to 460 million euros ($538 million) were sold in the IPO.

The deal values the company at 2.3 billion euros, including debt, with 38.3 million shares being sold. KKR is set to hold 63.5% of the company after the stock market listing.

“Books are covered at (12 euros per share) on the base deal size plus the greenshoe,” the bookrunners said.

In a separate deal, Germany’s caravan maker, Knaus Tabbert , which had priced at the bottom of the range and cut the number of shares on offer, fell below its offer price when it listed on Wednesday.

Hensoldt, a former Airbus unit which also supplies radar for Eurofighter jets and periscopes for Leopard and Puma tanks, was bought by KKR in 2016.

The company is set to rake in 300 million euros from the sale of the new shares, while private equity owner KKR will reap 160 million euros in proceeds from selling part of its stake, if the greenshoe is exercised.

Hensoldt is planning to use the funds for investment and to repay debt, bringing down its leverage to about three times its core earnings by the end of 2020.

The share sale at 12 euros apiece values Hensoldt at about 11 times its core earnings, while peers Ultra Electronics and Mercury Systems trade at 10 and 20 times their earnings, respectively.

Hensoldt also makes radar systems used in Eurofighter jets and periscopes for submarines and Leopard and Puma tanks.

Separately, it supplies identification systems for combat jets, night vision devices, radar for civil air traffic control and systems for civil and military efforts to counter drones. ($1 = 0.8441 euro) (Reporting by Arno Schuetze and Ann Maria Shibu in Frankfurt Editing by Jan Harvey and Matthew Lewis)

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