Major strategic partnership - Lagardère and Aerospatiale

Citation

(1998), "Major strategic partnership - Lagardère and Aerospatiale", Aircraft Engineering and Aerospace Technology, Vol. 70 No. 6. https://doi.org/10.1108/aeat.1998.12770fab.030

Major strategic partnership - Lagardère and Aerospatiale

Major strategic partnership ­ Lagardère and Aerospatiale

Keywords Aerospace industry, Aerospatiale, Lagardère

Lagardère and the French Government recently announced that they have reached agreement to bring together the activities of Aerospatiale and Matra Hautes Technologies through the contribution of Matra Hautes Technologies and Aerospatiale. This agreement is in line with the strategy which was announced by the French, British and German Governments on 9 December 1997 concerning the consolidation of the European defence, aerospace and satellite industries.

The new group will be the leading European company in its industry and will rank as number four in the world after the three US companies Lockheed Martin, Boeing and Raytheon Hughes with a consolidated annual turnover in excess of FF80 billion and employing some 56,000 people.The businesses contributed by Lagardère will be 100 per cent of Matra Hautes Technologies, the company which contains all of the defence and space activities of Lagardère (being 50 per cent of Matra BAe Dynamics, 100 per cent of Matra Systèmes et Information, 100 per cent of Matra Défense Equipements et Systèmes, 51 per cent of Matra Marconi Space) together with 50 per cent of Matra Nortel Communications.

The new group will be publicly quoted and the introduction of the company to the stock market will provide the opportunity for employees to acquire a substantial number of shares. In addition, the French Government will hold a "golden" share.

Lagardère and the French Government will put in place a strategic partnership which will cover the future development of the shareholdings of the new group and the appointment of its management.The principles agreed for the shareholding structure of the new group are the following:

• •

  Aerospatiale will be privatised and the majority of its shares will be held by the private sector.

• •

  Based on the valuation of its businesses, together with any cash adjustments, Lagardère will hold between 30 and 33 per cent of the enlarged group in its capacity as the preferred industrial partner and will be the largest private shareholder of the new group.

• •

  As defence and aerospace consolidation occurs in Europe, other private sector companies may join as shareholders.

Lagardère and Aerospatiale have already developed strong European collaborations. This is evidenced in Aerospatiale, through the creation of the Airbus and ATR GIEs and Eurocopter and in Lagardère, through the creation of Matra Marconi Space, of Matra BAe Dynamics, and the ongoing transformation of MMS into an integrated European company incorporating the space activities of DASA. The new group will continue to develop European partnerships.

One of the strategic objectives of the new group will be to help catalyse the process of consolidation of the European defence and aerospace industries in order to increase its competitiveness and to develop businesses equal in stature to US competitors in the interests of the shareholders, customers and employees of the new group.

The priorities of the new groups, together with its European partners will be:

• •

  to progress the ongoing transformation of the Airbus GIE into a single corporate entity for the benefit of all Airbus shareholders together with the setting up of centres of excellence;

• •

  through the combination of the businesses of Matra Bae Dynamics and Aerospatiale's missile activities to strengthen further the world leading position in this area of activity into which French and other European players will be invited;

• •

  to reinforce the space activities of the new group in pursuing European integration particularly in the consolidation of the European launcher business;

• •

  to promote a strategic European alliance in military aircraft through discussion with Dassault Aviation;

• •

  to progress and develop partnerships concerning Eurocopter;

• •

  to progress and develop the regional aircraft activities; and

• •

  to develop a systems capability around Matra Systèmes et Information and ISTI.

These priorities demonstrate the strategy of Lagardère and Aerospatiale to be the driving force behind the formation of Europe's industrial partnerships in the defence and aerospace industries. The new grouping will create shareholder value for Lagardère shareholders; it will also provide the opportunity for both Lagardère shareholders and current and prospective shareholders in the new group to derive significant benefits from the restructuring of the European defence and aerospace industries. The valuation of the respective businesses has yet to be undertaken; however, once this is completed Lagardère expects that the process will be earnings enhancing for Lagardère shareholders.

Lagardère and Aerospatiale intend that the creation of the new company will become effective from 1 January 1999. Up until such time the two groups will consult one another on their development and strategic alliances.

The two groups have agreed with the Government that they will work as rapidly as possible to reach a detailed agreement on the commercial and financial issues for the new enlarged group. These agreements will require the approval of the Commission des Participations et des Transferts, and the works councils of all the companies concerned. In addition the formation of the new company will be subject to other approvals including, inter alia, those of Lagardère's shareholders, the Conseil des Marché Financiers and the IPO of the new company and the European Commission.