Julian Moxon/PARIS

The French Government has cleared the way for the privatisation of Aerospatiale after agreeing terms for the merger of the manufacturing giant with the Lagardère group's defence unit, Matra Hautes Technologies.

In return for putting Matra into the new grouping, Lagardère will receive a 33% holding in the expanded company, but must also make a payment of up to Fr2 billion ($344 million) to the Government.

The two sides first agreed the merger last June, and the level of payment by Lagardère appears to have been the main sticking point in finalising the deal.

Given Aerospatiale's weak financial position at the end of 1998 - when it made a loss, despite record sales of Fr58 billion - Lagardère was reluctant to agree to a big, one-off payment.

Ultimately, the company, owned by media mogul Jean-Luc Lagardère, agreed to pay Fr850 million, with up to Fr1,150 million to follow two years after Aerospatiale's stock exchange debut later this year.

The final amount will depend on Aerospatiale's financial performance, and may be reduced to virtually nothing if the share price fails to climb to pre-defined levels.

The merged entity, to be called Aerospatiale-Matra Hautes Technologies, will be the world's fifth largest aerospace company, and will rank second in Europe behind British Aerospace/Marconi Electronic Systems, assuming that deal gets UK and EC approval.

The new company will also control Aerospatiale's 46% stake in Dassault Aviation, which was formerly held by the French Government, while Aerospatiale will transfer its 4% stake in Thomson-CSF, which is valued at about Fr1.5 billion, to the Government.

With Lagardère taking 33% of Aerospatiale-Matra, the French state's holding is reduced to 44%, effectively privatising it. Paris will, however, retain a 'golden share'. Around 20% of shares will be available to private shareholders, with the workforce getting 3%.

Source: Flight International