Thales and Candover Investments plc have reached agreement on the sale of Thales High Tech Optics (HTO) activities in the UK, US, Singapore, Germany and Hungary. Under the agreement, Candover has acquired the businesses, regarded as non-strategic for Thales, for a total consideration of EUR 220 million (USD $264.4 million), payable in cash. The sale is conditional upon regulatory approval.
Based on statements from both Thales HTO and Candover, further acquisitions and expansion are definite possibilities for the new company. Meanwhile, firms like South Africa’s Denel, who had intended to position themselves as niche partners to the larger European defense firms, may be watching the emergence of an important optical and optronics competitor.
Thales HTO designs and manufacturing high precision optical components and modules for both military and civil applications. It is active in four main areas: infantry night vision, optical components, optical modules and optical coatings.
HTO has principal operations in the UK and Singapore and various other manufacturing or commercial activities in France, Germany, Hungary and the US. The company employs approximately 1,400 people and reported revenues of EUR 124 million in 2004.
In the UK the company specialises in the design and manufacture of complex optical modules and components for applications in avionics, defence optics, night vision and space. Principal products include head up displays for aircraft jets, advanced optics modules for defence equipment and infra-red optics programmes, night vision sites and coatings for satellites.
In Singapore the company designs and manufactures high precision optical components and sub-assemblies for the defence night vision market as well as the medical and instrumentation market.
Interestingly, Thales has divested some but not all of its optical capabilities. Thales’ Senior Vice President for Strategy, Research and Technology Jean-Loup Picard explained:
“With this sale, Thales has divested non-core businesses. We bought Avimo and Pilkington for their optronic system capabilities which will continue to be part of our key product portfolio but we do not believe it is in the best interests of these HTO businesses to remain under our ownership … As demonstrated over the last four years, it has been our strategic intent to refocus the business on our core activities to strengthen our leading position as a large systems integrator and equipment and services provider in defence and security. This divestment will provide further considerable financial resources for both organic and external expansion in such areas.”
Candover’s release, meanwhile, established that equity funding will be provided by funds managed by Candover, with debt and mezzanine financing provided by Royal Bank of Scotland. Management will also be investing in the transaction, but further details of the financing structure have not been disclosed. Candover’s advisors on the transaction were ABN Amro (M&A), Pricewaterhouse Coopers (accountancy), Weil Gotshal & Manges (legal) and Roland Berger (industry consultants).
Candover is an investment firm specialising in buyouts of media, chemical, financial services, and IT companies in the UK and Europe. This is usually done in conjunction with existing management.
Thales HTO CEO Benoit Bazire said that his intent is to “create an unrivalled global player able to offer customers a full range of products and services in the high tech end of the optics value chain. Candover has indicated its full support for our growth strategy…”
Cyril Zivré, Director of Candover supported that notion by commenting that “HTO provides us with a strong platform for industry consolidation, and we look forward to working with management to identify acquisition and expansion opportunities.”