French and Italians in talks to be €12.5bn allies

***Matthieu*** · April 6th, 2005, 08:23 PM

French and Italians in talks to be €12.5bn allies
Defence marriage between Thales and Finmeccanica would challenge BAE Systems and present competition worries to MoD

By Clayton Hirst
03 April 2005

Thales, the French arms and electronics company, has raised the prospect of a €12.5bn (£8.6bn) merger with its Italian rival Finmeccanica. This would create Europe's second- largest defence group and present a big challenge to BAE Systems.

Well-placed sources said that Thales executives had held discussions with their Italian counterparts over the past few weeks, but the talks were still at a "very informal stage".

The move follows the collapse of negotiations between Thales and EADS, Europe's largest defence group, last year following objections from the British and German governments.

Alex Dorrian, chief executive of Thales UK, said: "I suggest that it is time to look at [consolidation in] Europe. From Thales' point of view we will look at what opportunities there are and see if they fit in with our strategy. We will look at our relationship with Finmeccanica and see how that can develop. There are a number of opportunities going forward."

A tie-up between Thales and Finmeccanica would be controversial. Both companies have a significant presence in the UK market. Thales is involved in the Government's £3bn project to built two aircraft carriers and has bases in more than 60 locations. Meanwhile, Finmeccanica owns helicopter maker AgustaWestland and is in the process of buying BAE Systems' avionics business.

A combined Thales-Finmeccanica would employ 20,000 people in the UK and generate sales of nearly £3bn. This would create a company to rival BAE, which employs 40,000 people in the UK and last year generated sales of £6.2bn.

Defence industry sources said that as well as providing a threat to BAE, the UK Ministry of Defence might take a dim view of a Thales-Finmeccanica tie-up as this would reduce competition. The deal would also require the approval of the French and Italian governments. Just under a third of each company is owned by their respective governments.

Finmeccanica's chief executive, Pier Francesco Guarguaglini, is tomorrow expected to comment on the prospects for the European defence market when he presents the annual results and an outlook for 2005.

Separately, Thales is looking to increase its presence in the UK market, where it has built a strong relationship with the MoD. Mr Dorrian said: "We will certainly look for acquisition opportunities in the UK. We will look at companies in defence, security and service provision - anything that strengthens our ability to be a systems integrator in the UK."

Thales' position in the UK is underlined by its involvement in the project to build the aircraft carriers for the Royal Navy. BAE was originally selected by the MoD to lead the project ahead of Thales. But after considerable wrangling, the MoD has now set up an "alliance" in which BAE and Thales are equal partners.

However, in Freedom of Information disclosure, the MoD has revealed that Thales has so far been paid £96m for its work on the project compared to £86m to BAE.

An MoD spokesman said: "The payments reflect the work done so far in the alliance." A BAE spokesman said: "Although we have more people working in the alliance than Thales, the teams are completely integrated."

The MoD has also revealed that Kellogg Brown & Root, the subsidiary of US construction group Halliburton that was controversially hired in February to help manage the carriers project, will be paid £4m. Its contract will end in July 2005.

But there are fears that the aircraft carrier project is heading for more delays. Contracts are due to be signed in the autumn - in a process called "reaching main gate" - but insiders said that this would not happen until February at the earliest.

http://news.independent.co.uk/busine...p?story=625791

Zim Flyer · April 6th, 2005, 09:46 PM

My only worry about increased competition in this arena, is where companies like British Aerospace make tenders which are too low in order to win the business and once construction starts, so do the increases in costs.

Englishman · April 7th, 2005, 01:19 AM

That's the problem with these. A company should bid and be made to complete under the budget given. If they can't don't bid. What's the point of private companies otherwise?

The alternative is to bill for hours worked.

Lance · April 29th, 2005, 02:54 AM

They'd just take more hours lunch break in that case. I think they should sign a contract which gives a cost, then there should be certain boundaries (like 2-3%) they could increase the costs to then no more. If they say it costs more then its their own fault and they should have to deal with it or face legal action (repayment of whatever has been paid up to that point or something, or no more payments plus penalty for cancelling??). Something to make them do their homework properly and stop the corporate fat cats getting even fatter!

April 6th, 2005, 08:23 PM	#1
*Matthieu* Administrateur Join Date: Mar 2004 Location: Tarbes, the capital of the world Posts: 12,312 Likes (Received): 88	French and Italians in talks to be €12.5bn allies French and Italians in talks to be €12.5bn allies Defence marriage between Thales and Finmeccanica would challenge BAE Systems and present competition worries to MoD By Clayton Hirst 03 April 2005 Thales, the French arms and electronics company, has raised the prospect of a €12.5bn (£8.6bn) merger with its Italian rival Finmeccanica. This would create Europe's second- largest defence group and present a big challenge to BAE Systems. Well-placed sources said that Thales executives had held discussions with their Italian counterparts over the past few weeks, but the talks were still at a "very informal stage". The move follows the collapse of negotiations between Thales and EADS, Europe's largest defence group, last year following objections from the British and German governments. Alex Dorrian, chief executive of Thales UK, said: "I suggest that it is time to look at [consolidation in] Europe. From Thales' point of view we will look at what opportunities there are and see if they fit in with our strategy. We will look at our relationship with Finmeccanica and see how that can develop. There are a number of opportunities going forward." A tie-up between Thales and Finmeccanica would be controversial. Both companies have a significant presence in the UK market. Thales is involved in the Government's £3bn project to built two aircraft carriers and has bases in more than 60 locations. Meanwhile, Finmeccanica owns helicopter maker AgustaWestland and is in the process of buying BAE Systems' avionics business. A combined Thales-Finmeccanica would employ 20,000 people in the UK and generate sales of nearly £3bn. This would create a company to rival BAE, which employs 40,000 people in the UK and last year generated sales of £6.2bn. Defence industry sources said that as well as providing a threat to BAE, the UK Ministry of Defence might take a dim view of a Thales-Finmeccanica tie-up as this would reduce competition. The deal would also require the approval of the French and Italian governments. Just under a third of each company is owned by their respective governments. Finmeccanica's chief executive, Pier Francesco Guarguaglini, is tomorrow expected to comment on the prospects for the European defence market when he presents the annual results and an outlook for 2005. Separately, Thales is looking to increase its presence in the UK market, where it has built a strong relationship with the MoD. Mr Dorrian said: "We will certainly look for acquisition opportunities in the UK. We will look at companies in defence, security and service provision - anything that strengthens our ability to be a systems integrator in the UK." Thales' position in the UK is underlined by its involvement in the project to build the aircraft carriers for the Royal Navy. BAE was originally selected by the MoD to lead the project ahead of Thales. But after considerable wrangling, the MoD has now set up an "alliance" in which BAE and Thales are equal partners. However, in Freedom of Information disclosure, the MoD has revealed that Thales has so far been paid £96m for its work on the project compared to £86m to BAE. An MoD spokesman said: "The payments reflect the work done so far in the alliance." A BAE spokesman said: "Although we have more people working in the alliance than Thales, the teams are completely integrated." The MoD has also revealed that Kellogg Brown & Root, the subsidiary of US construction group Halliburton that was controversially hired in February to help manage the carriers project, will be paid £4m. Its contract will end in July 2005. But there are fears that the aircraft carrier project is heading for more delays. Contracts are due to be signed in the autumn - in a process called "reaching main gate" - but insiders said that this would not happen until February at the earliest. http://news.independent.co.uk/busine...p?story=625791 __________________ "To erect a tall building is to proclaim one’s faith in the future, the skyline is a seismograph of optimism." Jean Nouvel

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April 6th, 2005, 09:46 PM	#2
Zim Flyer Rock Lord Join Date: Sep 2004 Location: Blackpool Posts: 12,920 Likes (Received): 4	My only worry about increased competition in this arena, is where companies like British Aerospace make tenders which are too low in order to win the business and once construction starts, so do the increases in costs.

April 7th, 2005, 01:19 AM	#3
Englishman Urge Desire Rest Join Date: May 2003 Location: London Posts: 2,378 Likes (Received): 4	That's the problem with these. A company should bid and be made to complete under the budget given. If they can't don't bid. What's the point of private companies otherwise? The alternative is to bill for hours worked.

April 29th, 2005, 02:54 AM	#4
Lance Most ignored user! Join Date: Sep 2002 Location: Southend Posts: 352 Likes (Received): 0	They'd just take more hours lunch break in that case. I think they should sign a contract which gives a cost, then there should be certain boundaries (like 2-3%) they could increase the costs to then no more. If they say it costs more then its their own fault and they should have to deal with it or face legal action (repayment of whatever has been paid up to that point or something, or no more payments plus penalty for cancelling??). Something to make them do their homework properly and stop the corporate fat cats getting even fatter!