Fincantieri and Naval Group Sign A Joint Venture Agreement: The
(Source: Finmeccanica – Naval Group; issued June 14, 2019)
The chief executives of Europe’s two largest naval shipbuilders, Giuseppe Bono of Italy’s Fincantieri (L) and Hervé Guillou of France’s Naval Group, on June 14 finally signed an Alliance Cooperation Agreement for a joint venture between their companies. (IT Navy photo)
Following the announcement made on 23 October 2018, today Fincantieri and Naval Group signed in Rome the Alliance Cooperation Agreement, which sets out the operational terms for the incorporation of a 50/50 owned joint venture.

The agreement, which follows the approval by the Boards of Directors of the two companies, embodies the contents of the "Poseidon" project and paves the way towards a broader alliance aimed at reinforcing their military naval cooperation and creating a more efficient and competitive European shipbuilding industry.

The agreement has been signed by the CEOs of the two companies, Giuseppe Bono and Hervé Guillou, on board of the frigate “Federico Martinengo”, moored at the Naval Base of the Italian Navy in La Spezia. The vessel is part of the Italian-French FREMM program, which underlines the soundness of the twenty-year collaboration between the two countries, their industries and the national navies.

The incorporation of the JV, expected in the coming months and in any case before the end of the year, will be subject to customary conditions for this kind of transactions and to obtaining the necessary authorizations from the relevant authorities.

Through the joint venture, Fincantieri and Naval Group will:
-- share best practices between the two companies;
-- jointly conduct selected Research and Development activities;
-- optimize procurement processes;
-- jointly prepare offers for binational programs and export markets.

Based on the agreement the company will be headquartered in Genoa with a subsidiary in Ollioules, France. The governance of the JV, as regulated in a shareholders’ agreement, envisages a Board of Directors of 6 members, 3 appointed by each company. For the first three-year term, Fincantieri will appoint the Chairman and the Chief Operational Officer, while Naval Group will appoint the Chief Executive Officer and the Chief Financial Officer.

Underlining the strategic value attributed by Fincantieri and Naval Group to this operation, Members of the Board will include Giuseppe Bono, appointed Chairman of the JV, and Hervé Guillou.

The Alliance represents a great opportunity for both groups and their ecosystems to enhance their ability to better serve the French and Italian navies, to capture new export contracts, to develop new technologies and, ultimately, to improve the competitiveness of the naval sectors of both countries.

On the sidelines of the signing Giuseppe Bono and Hervé Guillou stated: “We are very satisfied with the results achieved and, above all, we would like to thank our Governments which in the last few months have worked side-by-side with us, and continue to do so, with the aim of finalizing an agreement that will ensure the protection of sovereign assets while promoting cooperation between the two teams. This commitment will allow us to better serve our Navies, provide the appropriate support for common export operations and effectively lay the foundations for the consolidation of the European defense industry”.

Fincantieri is one of the world’s largest shipbuilding groups and number one by diversification and innovation. It is leader in cruise ship design and construction and a reference player in all high-tech shipbuilding industry’s sectors, from naval to offshore vessels. Headquartered in Trieste (Italy), the group has built more than 7,000 vessels in over 230 years of maritime history. With more than 19,000 employees, of whom more than 8,600 in Italy, 20 shipyards in 4 continents, today Fincantieri is the leading Western shipbuilder.

Naval Group is the European leader in naval defence. As an international high-tech company, Naval Group uses its extraordinary know-how, unique industrial resources and capacity to arrange innovative strategic partnerships to meet its customers’ requirements. The group designs, builds and supports submarines and surface ships. It also supplies services to shipyards and naval bases. The group reports revenue of €3.6 billion and has a workforce of 14,860 (data for 2018)

(EDITOR’S NOTE: In its final form, what was initially billed as a merger between Naval Group and the military activities of Fincantieri limited as it is to “selected” R&D activities and “jointly preparing joint bids” for shipbuilding work.

This is much the result of the continuing friction between the two countries’ governments, which control the two companies, as of the improved fortunes of both companies, which have scored significant successes on the export market since the merger was first unveiled in 2017.

“This development creates value and presents risks that are absolutely limited,” a source at the French defense ministry told the Paris website La Tribune, which translates as “if it doesn’t work out, there’s a way out” for both companies.

The two companies have also toned down their expectations.

Naval Group CEO Hervé Guillou says it’s about jointly resisting Chinese and Russian competition on the world market for warships displacing 2,000 tonnes to 10,000 tonnes, and told Le Télégramme daily that “together, we aim to win orders for one of two additional frigates each year over the next 5 to 7 years.”

The two companies’ agreement will be completed by an intergovernmental agreement setting out the sovereign interests of each, so the final form of the alliance is not yet final.

However, the two companies are already working to prepare the joint mid-life update of the Horizon-class air-defense frigates operated by both navies, and have already wet up three joint working groups to work jointly on five R&D projects for the export market, to prepare joint bids for future export competitions, and to rationalize purchasing to reduce costs.

Meanwhile, EU competition authorities have still not cleared the acquisition by Fincantieri of the French STX shipyard, which originally sparked the Fincantieri-Naval Group tie-up, and are unlikely to do so until a new executive is appointed reflecting the results of the May 26 elections to the European Parliament.

Fincantieri CEO Giuseppe Bono was quoted by Italian media as saying he was confident it would go through soon, but his optimism should be tempered by the fact that, announcing the referral on Jan. 9, the European Commission said it “considers that the transaction could harm competition at European and global level,” so the outcome may not be as clear-cut as Bono believes.

Furthermore, this referral to EU competition authorities was requested by France even though the proposed deal does not meet EU thresholds, and Germany joined in immediately, so there are clearly considerations and reservations affecting this deal that have not been made public.)


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