Shares in French telecommunications firm company Sagem lost 10% of their value last week after news of its merger with propulsion giant Snecma left analysts unimpressed.
The merger was agreed late last week by Snecma's board, following a similar agreement by Sagem chiefs in late October. The two-stage merger will lead to the long-awaited privatisation of Snecma and will create a combined aerospace, defence, electronics and communications group worth more than €7.3 billion ($9.3 billion). However, analysts accuse the French government of promoting French ownership over industrial focus and Sagem shares on the Paris stock exchange fell from over c80 a share before the news on 29 October to a low of €68 on 4 November.
The merger plan calls for savings of €160-190 million from elimination of duplication in the third year of any merger, a figure few analysts believe is achievable given the lack of obvious synergies in a deal that brings together France's largest aerospace propulsion and equipment company with the third largest European company in defence and security electronics.
Snecma and Sagem claim, however, that it will create a "major industrial and technology group that is competitive on the global stage and enjoys strong positions in growth sectors". They say the merger will create better financial stability because of the "complementary operating cycles" of the two which significantly reduces exposure to the US dollar exchange rate fluctuations.
Snecma president Jean-Paul B‚chat is expected to be named leader of the joint company. B‚chat will be welcomed as a mastermind of much of the consolidation of some of France's biggest aerospace names into the Snecma propulsion and equipment portfolio.
JULIAN MOXON & JUSTIN WASTNAGE / LONDON
Source: Flight International