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BAE, Finmeccanica Create EuroSystems (Jan. 28)

Finmeccanica and BAE Systems today signed the final agreement for EuroSystems in the Defence Electronics sector. The agreement is of great strategic and economic value for Finmeccanica in terms both of the group’s competitive position and of its objectives to achieve strategic and operational autonomy.

“Thanks to this operation, Finmeccanica will rank second in Europe and sixth worldwide in defence electronics,” said Chairman and CEO Pier Francesco Guarguaglini, “generating revenues of more than EUR 3 billion in the sector. EuroSystems will make a huge contribution to the group’s objectives of growth and increased focus on aerospace and defence.”

Under the agreement, Finmeccanica will acquire a number of important UK -based assets in the sectors of avionics, military and secure communications and air traffic control. Since AMS will now operate independently, synergies will be created with other group companies, making Finmeccanica a leading systems integrator in the electronics field.

Under the agreement:

-- a new avionics company will be set up, controlled 75% by Finmeccanica and 25% by BAE Systems;
-- Finmeccanica will acquire BAE’s military and secure communications assets;
-- the Italian assets of AMS NV will come back under the full control of Finmeccanica. AMS SpA will now head up the air traffic management and air traffic control assets acquired from BAE Systems in the UK, Germany (Gematronik) and the USA (ASI).

Revenues from the defence electronics assets controlled by Finmeccanica are expected to grow at least as fast as the sector as a whole over the next five years (+8% per year). Moreover, a preliminary analysis of possible synergies with the UK assets shows that their operating margins should also increase over the same period, reaching the same level as Finmeccanica’s existing defence electronics assets.

Preliminary estimates show that the full implementation of these synergies should lead to a 25% improvement in operating profits (Ebita) by 2008 compared to what these companies would have been able to achieve on a stand-alone basis.

At closing the total net cash consideration to be paid by Finmeccanica is EUR 516 million (£360m). In order to maintain the financial solidity and stability of the group Finmeccanica will fund this consideration through an appropriate combination between the disposal of portfolio assets, available cash and debt instruments.

At end-2004, Finmeccanica’s net debt stood at around EUR 400 million, which was better than expected. It includes the EUR 1,441.5 million generated from the sale of 93 million shares in STMicroelectronics NV (equal to 10.3% of the share capital of STM) to CDP, at a price of EUR 15.50 per share as well as the consideration paid to GKN for the acquisition of 50% of AgustaWestland (EUR 1,588 million).

EuroSystems (together with AgustaWestland and Space Alliance), is one of the three cornerstones of the group’s strategy of growth, international expansion and consolidation in its main areas of excellence: helicopters, defence electronics and aerospace.

Finmeccanica is Italy’s leading high-tech company, operating in the design and manufacture of aerostructures, helicopters, satellites, space infrastructure, missiles and defence electronics. It plays a leading role in the European aerospace and defence industry, and participates in some of the biggest international programmes in the sector through well-established alliances with European and American partners. It employs around 46,000 staff in total. As part of its drive to maintain and build on its technological expertise, Finmeccanica spends the equivalent of over 12% of its revenues on research and development. (ends)
Finmeccanica Signs EuroSystems Agreement to Become a European Leader in Defence Electronics