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Pierre Tran
HOOK, Sept 6: A planned merger of French aerospace companies Aerospatiale and Matra will throw up technological and financial benefits for the two firms as well as speed up Europe's overhaul of its bloated defence sector, company executives said.
The Aerospatiale-Matra group was a "totally fundamental step" by France towards creating a single giant aerospace and defence company capable of competing with the US combinations forged out of mega-mergers earlier in the decade, Aerospatiale chairman Yves Michot told journalists at a weekend press conference ahead of the Farnborough air show, opening on Monday.
Matra is a unit of the Lagardere conglomerate, which also owns major media interests.
The merger will give Lagardere between 30-33 per cent of Aerospatiale's capital and cut the state's stake below 50 per cent, meeting a key demand by European partners British Aerospace and Daimler-Benz Aerospace (Dasa) for a privatisation of the French firm.
"From now on, we are a member of the club," Aerospatialefinance director Francois Auque said. "By reducing the fragmentation in the French industry, we are reinforcing the fabric of European industry." Michot said the two companies were working at full speed to formalise the merger by the end of the year.
Lagardere managing partner Philippe Camus said the new group will have a net profit margin of around 4.6 per cent of combined 1997 turnover of 81 billion francs, which was below the European average and meant the group had potential to improve financial performance.
Aerospatiale's net margin was around 2.6 per cent and Lagardere's was 10 per cent, Aerospatiale said in a statement. That compares to British Aerospace's (BAe) margin of seven per cent, as estimated by a French share analyst.
The difference in Aerospatiale and BAe margins came from the British company's 80 per cent sales contribution from combat jets, particularly from a huge Saudi Arabian order for Tornado aircraft, and the French company's 70 per cent reliance on commercial Airbus planes,Auque said.
Airbus was still a young company and its product portfolio would yield big profits in the coming 10 years, he added. The merged French company will draw on a wider technology base, added purchasing power and enhanced financial engineering, Camus said. It would match the product spread of the US arch-rival Boeing and be able to respond to complex industrial offset requirements in international tenders.
Aerospatiale's Michot derided what he called the "Anglo-Saxon fantasy" of a heavy-handed state intervention in the company's commercial affairs and stressed his company's commitment to operating efficiently.
But analysts focus on the divergence of interests between private investors' demand for dividend payments and profitable sales, and the pursuit of market share and low returns afforded by the state as a major shareholder.
In response to the private-sector good, public-sector bad tag, Aerospatiale and Matra executives pointed to the costly productions problems suffered by Boeing since itsmerger with McDonnell Douglas in summer 1997.
Boeing has said its manufacturing difficulties over the 737 and 747 airliners stem from faulty execution of a $1 billion industrial re-engineering exercise launched before the McDonnell Douglas merger.
Aerospatiale upped its orders forecast for 1998 at the half-year by 10 per cent to 68 billion francs and had reached 62 per cent of its objectives, international affairs and sales director Denis Verret said.
Aerospatiale owns a 38 per cent stake in the four-nation Airbus consortium. The other partners are BAe, Dasa and Casa of Spain.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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