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December 15, 2005

DCN and Thales in consolidation move

France's state owned naval shipbuilder and defense contractor DCN is to acquire the French naval businesses of Thales. Thales is to take a 25 percent stake in DCN.

The move is described as a "significant milestone in the construction of a European naval defense industry," and was announced in Paris when France's Defense Minister, Michele Alliot-Marie, Minister for the Economy, Finance and Industry, Thierry Breton, DCN Chairman and CEO Jean-Marie Poimboeuf and Thales Chairman and CEO Denis Ranque signed a joint declaration of intent.

"Closer ties between European industry players are crucial to Europe's ability to sustain an independent industrial capability over the long term," said Mich¸le Alliot-Marie.

The project is a continuation of a process that has included the formation of Armaris in 2002 and successful cooperation between Thales and DCN on a number French and export programmes.

At the end of last year, legislation was enacted authorizing the opening of DCN's share capital, Since then, Thales and DCN have been looking for a closer cooperation the two partners have sought to move to a new level of cooperation in order to combine R&D efforts, share know-how and organize complementary areas of expertise.

The plan announced today is expected to be finalized by the summer of 2006. It involves transferring to DCN the non-equipment businesses of Thales Naval France along with the activities of the partners' joint venture Armaris and its subsidiaries, and those of MOPA2, a joint company set up for France's second aircraft carrier. The agreement also includes Thales' interest in Eurotorp, the European lightweight torpedo consortium.

Thales will own 25 percent of DCN alongside the French State which will retain 75 percent. According to today's announcement, Thales will have the voting rights needed to play an active role on the Board of Directors. After two years, under the terms of a new shareholders' agreement, Thales will have an option to increase its interest to 35%, in particular by contributing additional industrial assets to the company.

The operation strengthens DCN's position as an integrated naval defence contractor. DCN will generate revenues of approximately 3 billion euros, with an order book in excess of 8 billion euros and some 13,300 employees.

The two industrial partners stress that this operation is part of the consolidation of the naval defense sector in Europe.

"By consolidating our naval businesses, we intend to create a leading European prime contractor for major naval programs with the capacity to play a pivotal role in international markets. The operation represents a real development opportunity for our two Groups and their staff by putting us both in the best position to meet our customers' requirements in the future," said Jean-Marie Poimboeuf and Denis Ranque. "We will do everything in our power to make this project a success, and trust it will encourage closer ties with other European partners."

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