Thales agreed to acquire Alcatel's 67 percent stake in satellite manufacturer Alcatel Alenia Space, the companies announced April 5.
Thales will issue 26.7 million shares of stock to Alcatel and will pay 673 million euros ($819.9 million) in cash at the close of the deal, bringing the total value of the deal to more than $2.1 billion. Thales also may pay an additional amount to Alcatel at the beginning of 2009 based on the value of the 67 percent share.
"The move with Alcatel is a truly industrial project which is entirely coherent with Thales' strategy," Denis Ranque, Thales Chairman and CEO, said in a statement. "It strengthens the group and positions it at the heart of future consolidation operations within the European Critical Systems for Defense and Security industry. In this way, the group is in an excellent position to pursue discussions with its European partners."
The deal, which also includes Alcatel's Transport Systems activities, which do signaling solutions for rail transport and urban metros, and some Alcatel Systems Integration activities not dedicated to telecom operators and covering mainly the transport and energy sectors, follows Alcatel's April 2 announcement that it will merge with Lucent Technologies Inc. At a press conference in Paris Ranque, commented that although the deal "was planned well before" Alcatel sat down with Lucent "the Alcatel-Lucent merger made it even more desirable. The interests of national defense are preserved," he said.
"This transaction is a major step in Thales' development by strengthening its key capabilities in the integration of mission critical systems and by widening its customer base, both public and private," Thales said. "This move is entirely consistent with Thales' strategy, as it reinforces its systems capacities, its dual technologies and its international dimension. Furthermore, it underpins the European foundations of the group, supports its multi-domestic strategy and paves the way to leadership positions within high growth areas."
Following the conclusion of the Alcatel Alenia Space deal, Alcatel's stake in Thales will increase from 9.5 percent to 21.6 percent. Groupe Industriel Marcel Dassault will retain its 5 percent share in Thales, while the French government will remain the majority shareholder with 27.1 percent.
"With this transaction, the industrial and commercial partnership with Alcatel will be strengthened," Thales said. "Technical cooperation agreements will be put into place to draw benefits from the important common base of technology of the two groups and from the convergence of civil and military telecommunications solutions. Commercial cooperation agreements will allow the two groups to respectively benefit from their strong international presence."
Alcatel Alenia Space, which makes civil and military satellites, was created in 2005 when Alcatel and Finmeccanica merged their respective satellite operations. Finmeccanica, which holds the remaining 33 percent stake, must approve the deal, along with Thales shareholders, and the transaction also is subject to regulatory approvals, including the workers council, the French "Commission des Participations et des Transferts," financial market authorities and competition authorities, as well as to the final agreement of Alcatel within the framework of its projected merger with Lucent Technologies.
The acquisition, which is expected to be closed in the second half of 2006, will increase Thales revenues by more than 2 billion euros ($2.4 billion) per year, the company said. Thales also expects to derive operational savings of about 50 million euros ($60.9 million), but the company said it would not lay off any employees.
The acquisition of Alcatel Alenia Space also falls in line with Thales' ambition to be part of the consolidation of the European defense, aerospace and security industry, the company said. "In line with this and in parallel to the project, now agreed in principle, of acquiring Alcatel's activities, the board has mandated the chairman to evaluate additional projects with a similar approach," Thales said. "These projects could be envisaged in both the satellites sector and the defense electronics domain with other European players, should they show interest in such an initiative."