Italian industrial group continues with ambitious global acquisition strategy as it shakes off non-core businesses
Italian holding company Finmeccanica is seeking further acquisitions as it finalises a plan to shed non-core activities and refocus on the aerospace and defence sector.
Finmeccanica has completed €2.7 billion ($3.36 billion) -worth of acquisitions and mergers since 2000, and chief executive Roberto Testore says further takeovers and alliances will be agreed "when the opportunities arise".
Over the past five years, Finmeccanica has taken stakes in aerospace and defence companies including Aermacchi, FiatAvio and Marconi Selenia Communications, and has earmarked €1.5 billion to acquire GKN's stake in AgustaWestland.
In addition, the company has agreed to merge its satellite and space systems businesses with those of Alcatel and its defence electronics activities with those of BAE Systems into the EuroSystems joint venture.
Testore says the company is embarking on an ambitious strategy of global consolidation in an attempt to grow its aerospace, defence and security revenues from €6.2 billion last year to €10 billion by 2006. "These big negotiations are all aligned with our strategic direction, and are intended to focus us on the sectors of our main strengths internationally," he says.
Finmeccanica, in which the Italian government holds a one-third stake, had an "insignificant" debt to equity ratio of around 8% before its acquisition drive, says Testore, and the aim is not to increase that ratio above 40%.
Divesting non-aerospace and non-defence interests will pay for recent investments, and future activity will be funded by long-term debt. Finmeccanica sold off 17.2% of its stake in chip manufacturer ST Microelectronics earlier this year, netting it around €2.6 billion, but further disposals are necessary, says Testore.
Finmeccanica is now finalising plans to sell its Ansaldo rail, energy and information technology investments with an estimated combined value of around €2.3 billion. Testore says there are "several options being discussed" by Finmeccanica and the Italian government over the future of Ansaldo. "There could be a creation of a civil Finmeccanica, where these companies sit under a government umbrella; or we could agree to stay on as a minority shareholder; or there could be full privatisation," he says. There is no timetable for a final decision, although it will be the board, rather than the government, which decides, he adds.
Testore says Finmeccanica will seek strategic partnerships in international aircraft development programmes rather than launching its own projects. The holding company's subsidiary Alenia Aeronautica and its risk-sharing partner Vought Aircraft Industries have secured around 26% of the airframe development work on the Boeing 7E7 twinjet through fuselage and tailplane contracts.
The expansion strategy comes as Italian defence spending is pruned to 1.1% of gross domestic product. This leaves the company with "no choice but to look outside Italy", says Testore. Increased exposure to the US market is planned, he adds.
JUSTIN WASTNAGE / FARNBOROUGH
Source: Flight International
