Matra - Aérospatiale : a giant merger takes off
The merger between the public-sector company Aérospatiale and the private group Matra Hautes Technologies has created the world’s fifth largest civilian and military aviation group. It has also set the stage for new European alliances capable of competing with the industry’s major American players.
With the announcement, on February 15, 1999, of the merger between Aérospatiale and Matra Hautes Technologies (MHT), France has concluded a key chapter in the restructuring of its aeronautics and defence sector. It has also paved the way for new developments and set the backdrop for European alliances within the framework of increasingly tough international competition.
Aeronautics, telecommunications, space, defence: Aérospatiale Matra emerges as the second largest European group in civilian and military aeronautics.
The first stage was reached in autumn 1997, with the decision by the French government to privatise Thomson, thereby encouraging its link-up with the Alcatel group. The merger, now finalised, between Aérospatiale and Matra Hautes Technologies completes the picture and puts an end to the fragmentation within France of a highly strategic sector with equally vast economic stakes. A brief reminder of the chronology of events: In 1970, the French government decided to set up the SNIAS (Société nationale des industries aérospatiales) which, with the exception of Avions Marcel Dassault, consisted of Nord-Aviation, Sud-Aviation and the SEREB (Société d’études et de réalisation d’engins balistiques). A year earlier, Sud-Aviation and Deutsche Aerospace had founded the Airbus joint venture which, later, expanded to include the United Kingdom and Spain. Aérospatiale became heir to the SNIAS, with the French state its sole and exclusive shareholder.
Following a series of carefully orchestrated alliances, in particular with Germany’s DASA, Aérospatiale emerged as something of an "industrial architect"; indeed, for the past thirty years, it has been the driving force behind the construction of the European aeronautics and defence industry, with Airbus, ATR (Avion de transport régional), the Ariane rocket, helicopters, telecommunications and civilian and military observation satellites, ballistic missiles, etc.
Matra Hautes Technologies, for its part, is present in three sectors: aerospace and defence (where it has concluded alliances with the UK companies GEC-Marconi and British Aerospace respectively) and telecommunications.
Under the terms of the agreement of February 15 giving rise to the new super-entity, the French state has agreed to reduce its stake in Aerospatiale’s capital from 100% to 48%; prior to that, i.e. since December 30, 1998, it had ceded to Aerospatiale its 46% share in Dassault Aviation. The Lagardère group acquired 33% of the Aerospatiale stake, thus becoming the privileged strategic partner and the first private shareholder; in return, it contributed the activities of MHT.
Some 20% of the shares in Aérospatiale Matra are to be floated on the Paris Bourse by the end of the first half of 1999, 2% being earmarked for the 56,000 employees of the new entity.
A world player
Aérospatiale Matra emerges as the second largest European group behind the U.K.’s British Aerospace and GEC-Marconi, who combined forces in January 1999, and the world’s fifth largest group in the civilian and military aeronautics sector. Its consolidated turnover exceeds FF 80 bn (1998 basis), or euro 12.2 bn*, predominantly export-driven. Indeed, in 1998, Aérospatiale achieved 78% of its total sales (FF 54.9 bn, or euro 8.37 bn) outside France.
It is clear, then, that Aérospatiale Matra, with its many partnerships, plays a key rôle in Europe’s aeronautics and defence industry. And, unlike other major groups, be they European or U.S., it is the only group with a presence in all segments of the aeronautics and space sector. Experts generally agree that "the complementary nature and broadening of the group’s product spectrum will help to cut costs, especially in RD, achieve savings in procurements and streamline industrial resources".
The creation of Aérospatiale Matra comes as part of the grand project set out by the joint declaration by the European Heads of State and Government, issued on December 9, 1997, which called upon key industrial players in the aeronautics and defence sectors to seek strategic agreements and alliances in order to establish a major European grouping.
In spite of the Anglo-British rapprochement between British Aerospace and GEC-Marconi, Aéospatiale Matra emerges as a force to be reckoned with on the European scene. Commenting on the merger, Dominique Strauss-Kahn, the French Minister of Economic Affairs, Finance and Industry, stated: "This is a very happy day for the French aeronautics industry, one that will enable it to prepare France for other alliances with European partners." Defence Minister Alain Richard, for his part, underlined that "all kinds of possible constellations have now opened up with many partners. There is more than just one option."
Indeed, Spain’s CASA and Italy’s Finmeccanica, currently undergoing privatisation, and, more importantly, Germany’s DASA, isolated ever since its failed merger project with Britain’s Aerospace in 1998, are on the lookout for partners. Aeronautical experts believe that "it’s now a matter of encouraging convergence so that the Europeans can strengthen their alliances and thereby stand up to the U.S. giants such as Boeing-Mac Donnell or Lockheed-Martin, who first triggered these processes of major concentrations". Accordingly, the French authorities have indicated that they are willing further to reduce, if necessary, the government’s stake in Aérospatiale to make way for investors from within the European Union.
Journalist
* On the basis of the definitive exchange rate for the euro set on January 1, 1999, i.e. 1 Euro = 6.55957 French francs.
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