Eurosystems Joint Ventures in Defense Electronics Approved by EU
European regulators have approved a deal between Finmeccanica SpA of Italy and Britain’s BAE Systems PLC to create Eurosystems, a set of joint ventures in defense electronics. A BAE spokesman said the deal would create a clearer management structure would also increase the chances of landing contracts in an industry dominated by heavyweight manufacturers. The deal breaks down as follows:
- The old 50-50 joint venture known as Alenia Marconi Systems (AMS) will be dissolved.
- BAE will buy up the British assets of AMS (valued at GBP 360 million), and Finmeccanica will take its Italian assets (valued at GBP 260 million). BAE will then take 75% of a joint venture focused on systems integration, producing information systems and sub-systems, combat management systems, and land and naval radars. BAE Systems will pay Finmeccanica an equalizing amount of GBP 50.5 million in cash.
- Finmeccanica will take 75% of a joint venture resulting from the merger of BAE Systems Avionics, Ltd. and Galileo Avionica SpA, producing sensors, airborne radar, mission systems, electro-optics and electronic warfare systems. This new joint venture is valued at GBP 1.08 billion, and BAE will own 25% and receive net cash consideration of GBP 379 million.
- Smaller side deals included in the shuffling of assets will see Finmeccanica buy AMS’ UK Air Traffic Management business (GBP 10.5 million), while its subsidiary Selenia Communications will buy BAE’s UK Communications business (GBP 25.4 million).
The net of all transactions Finmeccanica could end up paying BAE a GBP 633 million cash consideration upon completion of all deals, with GBP 364 million up front and a further GBP 269 million option arrangement for the remaining 25% of BAE’s interest in the avionics joint venture. AP coverage, Reuters UK coverage, and BAE’s Jan 27 news release detailing the transaction.
