Here’s how Leonardo and Fincantieri will get engaged
All the latest news on the future of Leonardo and Fincantieri between facts, rumors and scenarios
We are once again talking about the dossier on Leonardo's aggregation with Fincantieri in a pole of national defense.
This time it is Il Sole 24 Ore that writes that "the study is advancing for a possible integration: not necessarily a dry merger but on homogeneous business in the military and naval fields".
With regard to the defense and aerospace giant Leonardo and the shipbuilding group Fincantieri, the Confindustria newspaper recalls that “sometimes they acted in coordination, with excellent results. They also go strong on their own, of course, but on the upper floors – the Government, which holds the controlling shareholdings – we also think about a different perspective ”.
In fact, the government is the main shareholder of both Leonardo (30% owned by Mef) and Fincantieri (controlled by Cdp Industria with 71.32%).
"They are companies listed on the Stock Exchange, and therefore caution is utmost but – as reported by the Sole 24 Ore – within the government rooms the hypothesis is the subject of reflection, in particular in the Departments of Defense, Economic Development and the Mef, in view of the greater investments in the defense sector and transnational integration, in a logic of collaboration-competition ".
On the other hand, the war in Ukraine has pushed up military spending in Europe and Prime Minister Mario Draghi stressed the need to rationalize investments . And to count at the European defense table, Italy would have a greater weight with the two national giants in synergy. “We need a national champion of strong dimensions and advanced contents to dialogue on an equal footing”, remarks Il Sole 24 Ore .
Yet the market would not appreciate a merger between Leonardo and Fincantieri, for more than one reason, Banca Akros already claimed at the end of May.
All the details.
THE INPUT FROM PALAZZO CHIGI ON THE ITALIAN POLO FOR DEFENSE
The theme of the Italian defense center around Leonardo and Fincantieri has been at the center of the debate in recent months.
After the release at the end of May of the Minister of Economic Development Giancarlo Giorgetti on the subject of "an Italian military pole", everyone thought about the Leonardo-Fincantieri merger.
“It would be naive to think that an Italian military pole could be competitive on its own, but it is clear that when we go to discuss the European defense industry we must present ourselves to the best of our ability and play our cards. We have excellence, quality and competence, we must certainly do it, ”said Giorgetti. "The evolution of defense demand in Europe will be particularly conspicuous and accelerated in the coming years and we must rise to the occasion". According to the minister, the issue is currently being discussed with colleagues from Defense, Lorenzo Guerini, and from the Economy, Daniele Franco.
“I would be in favor of the merger between the two giants of state. Also because with an operation of this type we would be able to give a development to the terrestrial part of our military industry. It would be a positive prospect for our country, ”said Undersecretary of Defense Pucciarelli at the UILM congress at the end of May. “The government, or at least a piece, is pressing for a merger between Fincantieri and Leonardo”, underlined the 19th century .
In fact, Defense Minister Guerini remained more cautious: “The path of a European defense must improve performance at the community level to enable us to compete with global players, but without giving up our national strategic dimension. Italy wants to be the protagonist of a technological leap, but every choice will be subordinated to this principle ”said the minister speaking at an electoral appointment in La Spezia on June 9th.
THE POSITION OF LEONARDO
“And here the managerial variables of the two companies come into play, decisive for the success of a possible merger”, Il Sole 24 Ore highlights today.
Leonardo's CEO, Alessandro Profumo, immediately curbed the enthusiasm, declaring that he does not see synergies between the aerospace and defense group and the shipbuilder Fincantieri. “Let's take Fincantieri: they build ships for the civil and military sectors. There are synergies between them. While it does not seem to me that there are between those who make defense electronics and those who build hulls ”he pointed out in a recent interview with Repubblica .
Profumo “pushes for the creation of an aggregation pole for a European-sized defense electronics group” recalls the Confindustria newspaper. And in the meantime Leonardo is moving towards the concentration of the core business and the focus of the portfolio. As demonstrated by the recent maneuver of the merger of Drs with the Israeli Rada.
AND THAT OF THE NEW FINCANTIERI TOP MANAGEMENT
A different potion seems to be the one assumed by the new leaders of the Trieste naval group. The CEO Pierroberto Folgiero , who succeeded Giuseppe Bono at the helm of Fincantieri, seems to have opened the possibility of an aggregation with the defense and aerospace giant.
If the studies show "long-term commercial, productive and occupational advantages", a clear creation of value, "there will also be the operation" declared the CEO of Fincantieri, Pierroberto Folgiero, on the sidelines of the launch of Explora I on 30 May. “Italy has great industrial excellence and above all in the defense and security sector – commented the president Claudio Graziano on the same topic -. It is a world – he specified – in which competition and challenge grows. It is clear that we also need to do business in a more effective way ".
STRENGTH POINTS
“In short, they are moving abroad, something must also be done by us. The question at this point is: what to do? " Marroni points out in the Sole 24 Ore . "Let's start with an element, also confirmed by military circles, which are the main clients:" When the two companies move together they are winning ", and our thoughts fly to Fremm, the frigate sold to half the world, including the United States Navy United, ”he added.
As Roberta Pinotti, president of the Senate Defense Commission and former Defense Minister, had already remarked in recent days in an interview with Repubblica . “The box, the tool on which to think about naval co-production already exists and is called Orizzonte Sistemi Navali (51% Fincantieri, 49 Leonardo ed ). This company has already given great results, for example with the Fremm and so if we want to seek greater synergy between the two groups, let's take advantage of it, strengthening their skills ".
AND THE KNOTS TO UNLET
If politics therefore pushes to create synergies between the two groups, there are still critical issues to be resolved.
"The dossier is complex, because, even if we remain in the military field, they are two very different realities: one produces the naval platform, the hulls – but also in an advanced perspective of integration – the other (vast) electronic combat part. Fincantieri has a turnover of 6.9 billion and concentrates about 75% of its turnover on cruise ships, while the military part is about 20%: aircraft carriers, destroyers, corvettes, submarines, patrol boats and above all frigates ", recalls the Sun 24 hours .
And the newspaper admits that for "Leonardo, which has a turnover of 14.1 billion, the situation is the other way around, since most of the business is in the military field – helicopters, naturally also civilians, aircraft, electronics, defense systems – including a decisive bet for the future of cybersecurity ". Therefore, for the former Finmeccanica "naval weapon systems, according to market sources, represent a turnover of 2-3% of the total, but certainly with great growth prospects in this historical phase" reports Marroni.
NOT FUSION, BUT “VERTICAL AGGREGATIONS” ACCORDING TO IL SOLE 24 ORE
Therefore, according to Il Sole 24 Ore “The idea that arises – and not only in the two companies, but also in the financial market – is the possible search for" vertical aggregations ", where synergies would be strong and immediately activated. In short, «variable geometry» mergers, aimed at the national defense pole, and able to move towards European aggregation, with the two giants upstairs, Leonardo and Fincantieri, and above all the State and its golden power ”.
CASES OF SUCCESS AS MBDA
And to reinforce this hypothesis, Carlo Marroni recalls that analysts report successful vertical aggregation experiments such as Mbda, a European missile consortium (Leonardo, Airbus and Bae System) or the two joint ventures in the space field between Leonardo and the French company Thales ( Thales Alenia Space and Telespazio).
WHAT WILL THE MEF SHAREHOLDER DO?
"But the basic question remains: if the shareholder-government decides to go ahead with the merger, what could be expected?" therefore asks the Sole 24 Ore .
“The impression is that the design does not displease Cdp, the main shareholder of Fincantieri through Cdp Equity, and Mef, Leonardo's largest shareholder,” Repubblica wrote days ago.
"Assuming a simple merger at current prices, the state control stake would go around 36% and the 2022 net debt / ebitda ratio would be in the range 2 / 2.4 times depending on Fincantieri's debt calculation method, a level which would require careful evaluation ”, Equita Sim analyzed. "This reflects the different financial structure of the two companies, deriving both from the financing of the operations – the civilian ships are paid on delivery, for the military ones there is an advance and a sort of work progress – both the margins and the military they are much higher, ”the Confindustria newspaper added today.
THE OPINION OF THE ANALYSTS
Finally, analysts' evaluations weigh. These include Banca Akros which last month explained that the market would not appreciate a merger between Leonardo and Fincantieri, for more than one reason. “First, a conglomerate penalized by a discount would be born; second, the assembly risks not having enough votes to approve the merger; third, cooperation can be improved without equity involvement. Fourth, a period of reflection for the new CEO of Fincantieri on the business model ".
“Ultimately, what everyone is expecting now, and above all, is a strong industrial policy boost. Finance will follow, as will the government ”concludes Sole 24 Ore .
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/ecco-come-si-fidanzeranno-leonardo-e-fincantieri/ on Wed, 22 Jun 2022 11:09:46 +0000.