Julian Moxon/PARIS

European restructuring has finally got under way in earnest with the merging of four companies' satellite and space operations to create a $3 billion enterprise that will be third largest of its type in the world behind Lockheed Martin and Hughes Electronics.

The wider issue of merging defence and civil aviation interests, having been clouded by a swirl of speculation since early December, also appears to be on the verge of a breakthrough as details on the proposed British Aerospace/DaimlerChrysler Aerospace (Dasa) tie-up leak into the media.

The space agreement, first mooted in June 1997, brings together Dasa, the UK's GEC, France's Lagardère and Finmeccanica of Italy. The new company will become operational this year, once final agreement has been reached by the industrial partners and approval received from the European Commission. Matra Marconi Space (MMS) president Armand Carlier will head the company. The deal was signed following a last-minute delay, when GEC backed away while it reviewed its wider alliance strategy.

GEC's Marconi space business was teamed with that of Lagardère to form MMS in the early 1990s, with Lagardère holding the majority (51%) stake. Since then, MMS has almost doubled sales, to $1.4 billion in 1997, with an outstanding orderbook worth $2 billion. The arrival of Dasa's Raumfahrt-Infrastructure and Finmeccanica's Alenia Spazio businesses will bring total sales of the group to more than $3.5 billion. This will grow to over $4 billion when Aerospatiale's launcher interests are added following the completion of the Aerospatiale/ Matra Hautes Technologies merger.

Control of the company will be through a management board, which will consist of two members each from MMS, Dasaand Finmeccanica. The issue of voting rights has not yet been settled.

Shortly after the space alliance was announced, GEC confirmed its defence electronics deal with Alenia, to be called Alenia Marconi Systems, which will see the two merging their respective missiles, radars, command and control, air traffic control and flight simulation activities. The combined whole will be worth around $1.6 billion in annual sales.

At the same time, the UK company has revealed that it is in negotiations with potential suitors to merge with its aerospace and defence activities. On 22 December, the company announced its intention to split its civil electronics businesses, such as telecommunications, into a separate operation once it has decided on a partner for the aviation and military related businesses.

Talks are under way with suitors in the USA and Europe, including Lockheed Martin, Northrop Grumman, Thomson-CSF and BAe and a decision is expected soon. The French Government says it will cut its holding in Thomson-CSF from 40% to less than 10% to facilitate a merger.

GEC had belatedly tried to break into the BAe/Dasa merger talks, which have been under way for several months. Newspaper reports at the turn of the year suggested that that strategy had failed, for the moment at least, as the UK and German aerospace giants had finally agreed terms for a tie-up unencumbered by the complication of a third party joining what is already going to be a difficult reorganisation .

The Daily Telegraph in the UK says that the deal will see the group split 60:40 in BAe's favour, with voting rights split 70:30 - although that will make Dasa the largest single shareholder. Both companies say the move is a precursor to a wider reorganisation of Europe's aerospace and defence operations which will eventually include French, Italian, Spanish and Swedish companies.

Source: Flight International