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Finmeccanica Positive on BAE-EADS Talks

Sep. 13, 2012 - 02:21PM   |  
By TOM KINGTON   |   Comments
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ROME — Italy’s Finmeccanica has reacted positively to news of BAE Systems’ potential merger with EADS, rebutting concerns that it would come under threat from the new entity.

“The announcement of discussions regarding a possible combination of the businesses between EADS and BAE Systems represents an important step in the consolidation of the European defence industry,” the firm said in a statement released Sept 13.

Moreover, the firm added, the move represents “an even more significant step in geo-political terms, taking into account the two bilateral agreements recently undertaken between France and Germany and between France and the United Kingdom.”

BAE and EADS confirmed they were in merger talks Sept 12, with BAE to own 40 percent and EADS 60 percent of a possible unified firm, and with the French, U.K. and German governments owning shares.

Italian media on Sept. 13 suggested the move would leave Finmeccanica outflanked by the new aerospace and defense giant in Europe.

But Finmeccanica added in its statement that it has “promoted and participated in the integration of European defence, seeing this development as strategically important,” and “has established consolidated partnerships with both companies in the industrial, technological and commercial field, which will continue with the combined entity.”

One source close to Finmeccanica said that the firm was already a minority partner with BAE and EADS in the missile house MBDA and on the Eurofighter program.

“So if they team up, nothing changes,” he said. “If two of our partners on Eurofighter merge, they become stronger, and this could be positive for the program in international markets.”

“There would be no short-term consequence for Italy, although it would require Finmeccanica to accelerate its focus on its core business,” said Michele Nones, head of the security and defense department at the Istituto Affari Internazionali, a think tank here that is part funded by the Italian Foreign Ministry.

Finmeccanica is seeking to shed noncore civil activities and restructure its defense and aerospace activity.

Nones added that an EADS-BAE merger would move Europe from having four major groups — BAE, EADS, Finmeccanica and France’s Thales — to having one giant group trailed by Finmeccanica and Thales.

“It simplifies life for Finmeccanica,” he said. “Hitherto the firm has had a problem with size, and competing with the other groups. Now the new merged group would be unreachable, meaning that even if Finmeccanica sheds some activities, it will only be comparing itself to Thales.”

Finmeccanica’s former CEO, Pierfrancesco Guarguaglini, who stepped down last year amid corruption allegations, was less optimistic, telling an Italian news agency that Finmeccanica would need to react to the planned merger “either by looking at who else is suffering a blow from this operation, or by opening talks with [BAE and EADS].” That would require “imagination” and “government coordination,” he added.

As CEO in 2005, Guarguaglini suggested Finmeccanica could tie up its electronics activities with Thales.

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