Special Report : Aerospatiale/Matra merger
Compiled by our staff from wire service dispatches and other sources
1.      Official Statements : French government (French only), Lagardere Group
2.      The main points of the deal
3.      Reactions

1. Official Statements

Statement by Lagardere Group (Feb. 15)

 PARIS -- Lagardere announces the confirmation of its preliminary agreement with the French Government in relation to the strategic partnership between Lagardere and Aerospatiale. This agreement, which is detailed below, remains subject to the approval of the Commission des participations et des transferts. I
 In accordance with the Prime Minister™s previous announcement of 22 July 1998, Lagardere and Aerospatiale have developed an industrial plan aimed at regrouping the operations of Aerospatiale and Matra Hautes Technologies with the objective of uniting and reinforcing existing French core competencies in the field of Aeronautics, Aerospace and Defence. This agreement is seen as a first step in the construction of a Europe-wide industry.
 Following satisfactory completion of all stages of this agreement and the effective privatisation of Aerospatiale, Lagardere will receive 33% of Aerospatiale™s share capital in exchange for the transfer of Matra Hautes Technologies business to Aerospatiale and a payment of FFr 850 million to the French Government. The combined entity will be known as Aerospatiale Matra.
 As a result of the shareholder rights provided to Lagardere, the French Government has received guarantees from Lagardere in relation to the evolution of Aerospatiale Matra™s share price relative to the CAC 40. Lagardere could be required to make further payments to the French Government, up to a maximum amount of FFr 1,150 million, as a result of these guarantees.
 According to preliminary calculations, the agreement will enhance Lagardere™s earnings per share in 1999.
 Lagardere has entered into a shareholders™ agreement which will confer the position of a privileged strategic partner and principal private shareholder of Aerospatiale Matra. In this context :
 -The development of further links with other companies in the sector will take place in accordance with industrial co-operation agreements and the approval of Lagardere and the French Government.
 -Lagardere has a right of pre-emption when the public sector reaches the threshold of 20%, a right which is to be exercised on the residual public sector shareholdings. French Government has a right of pre-emption on any shares Lagardere wishes to dispose of.
 -Lagardere will maintain its holding in Aerospatiale Matra at 33% ; Aerospatiale Matra, which will incorporate the French Government™s holding in Dassault Aviation and exclude Aerospatiale™s 4% holding in Thomson-CSF, will be listed on the French bourse as a Limited Liability Company (Société Anonyme") with a Supervisory and a Management Board.
 -The President of the Supervisory Board and the President and the members of the Management Board will be appointed jointly by the Government and Lagardere, taking into account the nominations of Lagardere. The terms of reference of the Management Board of the new group as well as the principal decisions of this Board will be agreed between the two primary shareholders, the Government and Lagardere. The Government and Lagardere have already agreed to appoint on the one hand Mr. Jean-Luc Lagardere as President of the Supervisory Board and on the other hand, as members of the Management Board, Mr. Yves Michot as Chairman and Mr. Philippe Camus as Chief Executive.
 The Commission des participations et des transferts will examine the draft agreement before giving its opinion ; such draft will, at the same time, be submitted to the European Commission in Brussels, to the works councils of Aerospatiale and of the companies which form Matra Hautes Technologies, to the Management Board of Aerospatiale and to the Supervisory Board of Lagardere before being submitted to an Extraordinary General Meeting of the shareholders of Lagardere.
 The timetable for the envisaged operations is forecast to be achieved before the end of the first half of 1999 as initially expected.
 Reacting to this event Jean-Luc Lagardere commented :
 " It is my duty and pleasure, before all else, to express my gratitude to, and pride in, all those at Matra who, for almost forty years, have selflessly dedicated themselves to creating a dynamic force for innovation and creativity which is recognised in Europe and throughout the world. It is a great honour for my group of companies to stand alongside French Government at this moment of European and global integration, because in creating Aerospatiale Matra, the fifth largest group in the world, my group is leading France into the forefront of global aeronautic, space and defence markets.
 I am aware of Aerospatiale™s potential. I am familiar with their achievements and the very real advantages they possess. I have a a great deal of respect for the company™s management, but if we are to meet the new challenges facing all of us, we must be stronger. The birth of Aerospatiale Matra is just one decisive step in the enormous restructuring movement now taking place in Europe and around the world. There is no doubt that we will be key players in that movement, with a clear obligation to be competitive in every sense of that word whilst, at the same time, creating employment and adding value for our shareholders. The challenge is an exhilarating one and we must not underrate its difficulty, but I am confident. We will succeed.
 For a long time now, my Group has built special relationships by creating joint-venture companies with the major European players who are now our English and German partners, soon to be joined by their Italian and Spanish counterparts. We will do our utmost to continue the pursuit and development of this Europe-wide co-operation within the framework of Aerospatiale Matra, and to defend its interests fearlessly ".


Joint Statement by the French Ministries of Finance, Defense and Transport (Feb. 15)

(Editor's note : issued in French only)

 Une étape décisive dans la constitution du nouvel ensemble Aérospatiale-Matra

L'Etat et le groupe Lagardère viennent de conclure les négociations sur les conditions financières et partenariales de constitution du futur ensemble Aerospatiale-Matra.
 Dominique Strauss-Kahn, Ministre de l'Economie, des Finances et de l'Industrie, Alain Richard, Ministre de la Défense, et Jean-Claude Gayssot, Ministre de l'Equipement, des Transports, et du Logement, se félicitent de cet accord qui constitue une étape essentielle dans le processus de rapprochement des deux entreprises, décidé et annoncé dans son principe par le Premier Ministre le 22 juillet 1998.
 Il fait suite à l'accord d'actionnaires conclu le 10 novembre 1998 entre Aerospatiale et Dassault Industries qui a défini les caractéristiques du partenariat stratégique devant unir les deux actionnaires prépondérant de Dassault Aviation, et à l'accord industriel conclu le 8 décembre 1998 entre Aerospatiale, le groupe Lagardère, Alcatel et Thomson-CSF, qui a précisé les responsabilités et compétences respectives de chacune des entreprises dans les domaines de l'avionique, des systèmes de missiles et des satellites.
 En raison de la complémentarité industrielle d'Aerospatiale et de Matra Hautes Technologies, cette fusion n'entraînera pas de restructurations susceptibles d'avoir des conséquences en termes d'emploi, le rapprochement étant de nature au contraire à conforter les perspectives des différentes branches d'activités du nouvel ensemble.
 Le décret de privatisation d'Aerospatiale vient d'être publié au journal officiel, et le décret portant création d'une action spécifique, destiné à préserver les intérêts essentiels de la sécurité nationale, sera publié demain.
 En apportant Matra Hautes Technologies au groupe Aerospatiale, le groupe Lagardère deviendra le partenaire stratégique privilégié du nouveau groupe qui prendra le nom d'Aerospatiale-Matra, et son premier actionnaire privé avec 33% du capital. L'Etat demeurera, de façon déterminante, le premier actionnaire d'Aerospatiale-Matra dont les titres seront cotés.
 Préalablement à l'apport de Matra Hautes Technologies, le périmètre d'Aerospatiale sera modifié, la participation de 4% environ détenue par l'entreprise dans Thomson-CSF, d'une valeur de l'ordre de 1,5 milliard de francs, étant transférée à l'Etat.
 En contrepartie de l'obtention de 33% du capital du nouvel ensemble ainsi reconfiguré et des droits particuliers attachés au statut de partenaire stratégique privilégié fixés par le pacte d'actionnaires conclu entre l'Etat et le groupe Lagardère, et outre l'apport de Matra Hautes Technologies à Aerospatiale, le groupe Lagardère s'est engagé à compenser patrimonialement l'Etat à hauteur de 2 milliards de francs, à savoir un montant fixe de 850 MF, et un montant variable, fonction de l'évolution future du titre Aerospatiale-Matra, pouvant atteindre 1150 MF.
 L'introduction en bourse du nouvel ensemble devrait intervenir avant la fin du premier semestre 1999, si les conditions de marché le permettent. Des actions seront à cette occasion proposées à des conditions préférentielles aux salariés d'Aerospatiale. A l'issue de ces opérations, la part du secteur public et des salariés sera supérieure à 50%, la part propre du secteur public étant inférieure à 50 %.
 Le pacte d'actionnaires conclu entre l'Etat et le groupe Lagardère prévoit notamment que le nouveau groupe Aerospatiale-Matra sera doté d'un conseil de surveillance et d'un directoire, les dirigeants étant désignés d'un commun accord par l'Etat et le groupe Lagardère. Dans ce cadre, l'Etat et le groupe Lagardère sont convenus que la présidence du conseil de surveillance serait assurée par M. Jean-Luc Lagardere, et que le directoire comporterait M. Yves Michot et M. Philippe Camus, la présidence du directoire étant confiée à M. Yves Michot.
 Le pacte d'actionnaires dispose par ailleurs que les principales décisions concernant le nouveau groupe seront arrêtées d'un commun accord entre ses deux premiers actionnaires, l'Etat et le groupe Lagardère.
 Cette opération doit maintenant être examinée par la Commission des participations et des transferts dont, conformément à la loi, l'accord est nécessaire. Celle-ci sera saisie officiellement demain.
 L'opération sera également, dans les meilleurs délais et selon les formes prévues par la loi, soumise aux organes sociaux des entreprises concernées et notifiée aux autorités communautaires chargées de la concurrence.
 En franchissant cette étape décisive vers la fusion d'Aerospatiale et de Matra Hautes Technologies et la cotation du nouvel ensemble, le Gouvernement met en œuvre, dans le respect des intérêts patrimoniaux de l'Etat, les orientations arrêtées le 22 juillet dernier, qui s'inscrivent dans la perspective du regroupement des entreprises d'aéronautique et de défense européennes, conformément à la déclaration des chefs d'Etats et de Gouvernements du 9 décembre 1997.

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2.The main points of the deal

-Lagardere unit Matra Hautes Technologies to merge with Aerospatiale, which has already taken over the French government's 47.95 percent shareholding in Dassault Aviation. Before the merger, Aerospatiale will spin off to the French government its 4 percent holding in Thomson-CSF, worth about 1.5 billion francs at current prices.

-The French state will remain major shareholder of the merged company, with about 48 percent of equity. Lagardere will be the largest private shareholder, with 33 percent, employees will have 2 percent to 3 percent, and 17 percent will be floated on the Paris stock exchange by the end of June, "market conditions permitting."

-To make up for the difference in valuations, Lagardere will pay to the French state an amount of up to 2 billion French francs, broken down as follows : an immediate payment of 850 million francs, and a variable payment, of as much as 1.15 billion francs, whose exact amount will depend on the share performance of the new company relative to that of the CAC40 composite index of the Paris stock exchange over the next two years.

-The government will keep a "golden share" to guarantee that the new company "preserves the essential interests of national security."

-A shareholders' pact stipulates that key decisions, including any link-ups with other companies, be taken by common accord between the state and Lagardere.

 -Lagardere has the right of first refusal on shares sold by the government, should the state reduce its stake in the new group below 20 percent, while the government has a pre-emptive right to any shares Lagardere might sell.


3. Reactions and Commentaries :

French Finance Minister Dominique Strauss-Kahn, Feb. 15 press conference :
 The merger "is a prelude to the creation of a large aerospace company regrouping all European actors in this sector...We will see, in the coming weeks, how negotiations will take place. What I want to say, on behalf of this new company's largest shareholder, the French state, is that we are open to all sorts of discussions with our European partners."
 The merger "paves the way for other French alliances with European partners so that there can at long last be a group capable of competing with American rivals on equal terms," he said.

Analyst Christophe Chaperon at brokerage Oddo et Cie., quoted by Reuters Feb. 16:
"It's clear this agreement allows the Aerospatiale-Matra group to look further afield...in particular to the Germans who were snubbed last December by the BAe-GEC merger."

Dasa spokesman Rainer Ohler, Feb. 16:
"We are in talks with our French counterparts [but] there are many other options. We are a part of a large German-U.S. corporation and there are of course all sorts of American options. These too, not only the European options, are also being taken into consideration."

Dasa spokesman Christian Poppe, Feb. 15
"Complete privatisation of the French company is the most important precondition for restructuring the European aerospace industry."

Lagardere spokesman, Feb. 16
"We will quickly start talks, with the Germans first, but we will keep in contact with the British." Eventually, negotiations will also take in Italian and Spanish companies.

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