Space Activities for Sale: Avio makes the Vega launcher. The company is owned by UK fund Cinven and Italy's Finmeccanica group. (Avio)
ROME — European firms Safran and EADS have both made non-binding offers to buy the space activities of Italian propulsion firm Avio, which could come up for sale at the end of October, according to an Italian source familiar with the talks.
The two offers are both around €300 million (US $404 million) and give “very similar” guarantees on maintaining jobs and technology in Italy, the source said.
“Both contenders have said Avio’s space activity would remain autonomous within their groups and handle all their small launcher activity,” he said.
Avio’s aeronautics propulsion activity was sold this year for $4.3 billion to General Electric by UK fund Cinven, which held an 86 percent stake, and Italy’s Finmeccanica, which held a 14 percent stake.
The two firms held onto Avio’s space activity, which focuses on the small Vega launcher, under a deal in which Finmeccanica had first rights to buy Cinven’s share of the activity until the end of October.
With that deal now set to expire, Safran and EADS have tendered their offers for the space activity, which saw €285 million in turnover in 2012.
“If Finmeccanica decides to sell its stake, it will be Cinven to decide on the buyer. If Finmeccanica maintains a stake, both it and the Italian government will have a role in deciding which partner, if any, to involve,” he added.
The Italian government holds a 30 percent controlling stake in Finmeccanica.
“Both firms, which have been talking to Finmeccanica and the Italian government, have said they would be prepared to be minority or majority partners alongside Finmeccanica,” the source said.
An EADS spokeswoman declined to comment on the reported offer, while Safran did not respond to a request for comment.
In July, Safran CEO Jean-Paul Herteman referred to “The very strong proximity that could exist between ourselves and the space activities of Avio,” although the company declined to say if it was making an offer.
The source said that picking EADS as a buyer would favor consolidation in the European space launcher industry since EADS is already active in the sector through its unit Astrium. “Astrium is also already multinational, since it is running operations in Germany, France and the UK, so it might be a better guarantee of Avio’s autonomy than Safran.”
On the other hand, he added, Safran and Avio already have a joint venture providing fuel for launchers.
GE’s purchase of Avio, which works on engines for the Eurofighter Typhoon, Airbus A400M and Alenia Aermacchi M-346 jet trainer, was subject to a new Italian law, passed in 2012, which requires guarantees on security of supply from any buyers of strategic Italian industries.
The law was designed to replace Italy’s Golden Share system, under which it maintained final say over strategic decisions on specific public firms, including Finmeccanica. The Golden Share system was deemed anti-competitive by the European Union.
Under the new law, GE must protect the security of information on classified programs and maintain capabilities at Avio.
Should a foreign company buy Avio’s space activities, the same law will be invoked.
Whether Finmeccanica decides it wants to spend money to beef up its stake in Avio’s space work, or sell its 14 percent stake, is linked to whether it can bring in some much needed cash from the delayed sale of its civil energy and transport units, the source said.
But the October deadline on the Avio deal means time is short.
The firm originally planned to start disposals in 2012 to help cut a $6.8 billion debt pile, but opposition from Italian politicians and unions has delayed plans. The left-right coalition government, which took office in April, has also failed to take initiatives and appears to be undecided on the issue.
Some ministers have opposed outright sales to overseas firms, preferring to see a state investment fund take a stake to ensure an Italian role in management.
Meeting with union leaders on Sept. 23, Finmeccanica CEO Alessandro Pansa said Korea’s Doosan Heavy Industries was ready to buy Ansaldo Energia, while Finmeccanica was in talks with overseas firms for the sale of loss-making train unit Ansaldo Breda and rail signals firm Ansaldo STS.
Political sensitivities in Italy to foreign sales have grown this month after moves by Spain’s Telefonica to take control of Italy’s main telecoms company, Telecom Italia.
Opposition to the sale of Ansaldo Energia might have been less fierce if it had been protected by the same law protecting Avio. Ironically, the law was designed to give the same cover to strategic civilian industries as it does to defense and security firms.
However, the measure required follow-up decrees to define the specific activities covered. Such a decree was approved in August 2012 and legally entered force in February for defense and security work, including Avio’s space business. But no such decree has been passed for civil industries.
“This has been an ugly example of bad government and disinterested politicians,” the source said.