Julian Moxon/PARIS

The creation of a major French defence-electronics grouping around Thomson-CSF will be completed by May 1998, say sources close to the restructuring. Completion could open the way for incorporation of other European companies, possibly including Lagardère/Matra.

Talks are still taking place over how to proceed with the merger, which brings Thomson-CSF together with Alcatel's military communications and space businesses, the Dassault Electronique defence-electronics operations and Aerospatiale's satellites unit.

A source at Thomson-CSF expects the basic framework to "-become clearer" by the end of this year, with valuations to be completed by March and final agreement by May at the latest. Discussions now centre on how the individual businesses should be organised. In particular, there is the issue of how to integrate the Alcatel businesses in air-traffic management, air defence, battlefield detection and military communications - together having sales of around Fr2.5 billion ($471 million) - with its new partners.

French Government officials are now talking openly about the incorporation of Matra's defence business as a "natural" development. GEC has also confirmed that it has initiated talks with Alcatel over merging at least some of its activities in any future grouping. The two companies are already allied through their GEC-Alsthom power and train-building joint venture which will be floated as a separate company in 1998.

The first step in expanding the grouping, however, is expected to be through the inclusion of smaller French defence-electronics concerns, such as Sagem and Sfim.

The willingness of private companies to join the merger, however, depends on the role of the Government, which holds 58% of Thomson-CSF, although that may fall to below 50%. A Government report on the defence industry says that its role "-remains to be determined", but is likely to be one in which the state retains overall influence over key strategic decisions, while ceding other "rights" to private shareholders.

The fate of Aerospatiale's other businesses remains open, although Government sources say that the Thomson-CSF decision "-prepares the way for recentring Aerospatiale". The question of incorporating Aerospatiale's Fr3.9 billion missiles unit into Thomson-CSF's own Fr2.8 billion business has been left to one side so as "-not to complicate the situation".

The Government has repeatedly said that it believes in the idea of a single European missiles grouping based around a French core group - although some, including ministry of defence procurement chief, Jean-Yves Helmer, want to retain two major players within the European industry to ensure competitive contract pricing.

 

Source: Flight International