 Paris presses Thales, Safran to merge Paris (UPI) Jul 19, 2010 - France's government has frozen $400 million worth of orders linked to aerospace and engineering companies Thales and Safran. The move marks the latest show of pressure on the companies to consolidate some of their operations. The Expatica news site said the French government's decision "did not amount to a cancellations (in deals) and concerned commitments to order material this year. Both Thales and Safran are active in aeronautics, defense and security engineering. They were both engaged in company tie-up talks but those attempts were abruptly abandoned in 2007. Now, the French government, which owns stakes in both Thales and Safran, is pressuring both companies to resume talks aimed at merging some of their operations. Earlier this year, the companies were involved in a round of ill-fated talks focused on a potential swap of business lines. Safran specializes in aircraft engines, aerospace and security systems. It co-owns the world's largest jet engine company together with General Electric. Last week, the company proposed a tie-up with Zodiac, without any reference to a price or exchange ratio for shares. The bid, though, was spurned with board members unanimously claiming they couldn't find any platform for synergy. Some members even found the proposed merger a threat to existing operations and agreements. A potential merger with Zodiac could have forged a company with annual sales estimated at $12 billion. In fact, news of the tense standoff between Zodiac and Safran shot the former's shares. Safran has ruled out a hostile takeover move of the smaller company. Mergers and operation swaps have emerged as a budding trend in the defense industry. Europe's leading aerospace giant, EADS, for example, recently announced plans to venture into the U.S. market for similar business tie-ups, as that being proposed between Thales and Safran. Safran is said to be maintaining pressure on Zodiac to stitch up a merger, which has come under criticism by industry and financial experts. "Short of nationalization," wrote the British newspaper the Financial Times. "It is hard to see how a large state-controlled group can carry out a takeover of a solid, century-old, family-controlled company. Imagine a state conglomerate proposing a friendly takeover of Michelin. The tiremaker would not waste a second before sending the state packing." Thales's history of merger has been blighted. About a decade ago, it also tried to hook up with the state-controlled Snecma in a move that would have created the world's second largest aerospace components group. Snecma, however, snubbed the deal, merging instead with Sagem. |
The company said the new contract was worth $200 million but with indefinite-delivery and indefinite-quantity terms.
The Air Force earlier bought sensors and targeting systems from the company for another $200 million and some of the high-definition equipment has gone into Project Liberty Program, which is active in Afghanistan, Iraq and elsewhere.
The contract goes to L-3 subsidiary WESCAM and will be used by the Air Force to purchase the latest generation of L-3's MXTM-15Di targeting systems. The systems are equipped with high-definition sensors, and MXTM-20D targeting systems, also with HD sensors.
John Dehne, president of L-3 WESCAM, said the company was pleased to provide the imaging and targeting solutions needed to support the Air Force's "growing mission portfolio."
Over an 18-month period, three ID/IQ contracts have gone to WESCAM, enabling the Air Force to purchase a total of $400 million of products and services. The MX-15Di systems procured under the latest contract will be used on the Project Liberty program, which L-3 also supports as the prime contractor and systems integrator.
The Air Force has been seeking increasingly efficient high-definition targeting systems to meet with the needs of military operations in Afghanistan and Iraq and the latest contract responds to that need, analysts said.
Dehne said the modular design and versatility of the company's product line has enabled the Air Force to outfit both legacy and new platforms with the industry's most powerful electro-optical and infrared and laser sensors.
To date, the Air Force has purchased six models of MX turrets under these contracts. Each turret model features high-reliability, long-range performance, precision target location accuracy and ease-of-use on a variety of platforms.
The equipment provides stable full-motion EO/IR video in support of U.S coalition forces and troop operations in Afghanistan and Iraq.
L-3 Chairman, President and Chief Executive Officer Michael T. Strianese said the
"has grown very quickly into the sixth largest defense company in the United States" and is a leader and prime defense contractor in those fields.
L-3 says it has also secured leadership in homeland security products in aviation, port, maritime and cargo security as well as solutions for mass transportation.
Like many other companies, the security issues arising from the Sept. 11, 2001, attacks on the United States, have allowed L-3 to grow in other homeland security products and services for crisis management, intrusion detection, law enforcement and vehicles for first responders.
L-3 Communications has headquarters in New York City and is rated as a growing company. It employs 67,000 people worldwide and is a prime contractor in command, control, communications, intelligence, surveillance and reconnaissance systems, aircraft modernization and maintenance and government services. L-3 sales in 2009 totaled $15.6 billion.
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