Why Leonardo will sell Oto Melara and why he has to go to Fincantieri

Why Leonardo will sell Oto Melara and why he has to go to Fincantieri

How will the Oto Melara dossier end? The in-depth analysis by Aurelio Giansiracusa, military analyst and promoter of Ares-Defense Observatory

The near future question of the former Oto Melara inflames the political, economic and military discussion at the same time.

It seems that the political front (a more unique than rare case) is compact in supporting the position of the “Italianness” of the property of the former Oto Melara, pushing for a solution that favors Fincantieri who has made a purchase proposal. The same interventions on the subject of the Undersecretaries of State for Defense Giorgio Mulè and Stefania Pucciarelli confirm this address .

From the foreign "front" have received (or would appear to have received, according to economic-financial press sources) purchase proposals from the German side first (Rheinmetall) and the Franco-German side (Knds) or the feared one of BAE Systems, whose entities are subject of discussion, among those who consider them higher or lower than that which would have been presented by Fincantieri.

Certainly the stitches on the Fincantieri-STX France wound are still fresh, a deal substantially skipped because vetoes reached the European Antitrust Authority from Berlin and Paris itself; this precedent certainly does not favor a “European” perspective of the former Oto. Furthermore, there are also other previous examples of the acquisition of Italian companies active in the defense sector purchased abroad which do not bode well; they have not disappeared but the ribs of much larger and more organized groups remain; in simple terms, the investment to expand the productivity and market prospects of these firms remains low or uncertain.

How will it end? It would be interesting to know the real reasons that push Leonardo's top management to sell an important part of the core business of the group's Defense sector; naval guns and Wass with its solutions in torpedoes, underwater countermeasures and sensors, purchased at the time by Oto Melara, always "shoot", despite the tacky attempts to copy or clone Italian products in the field, a real excellence (for example for example Super Rapido, DART / Strales ammunition, Vulcano precision-guided long-range ammunition, Hitrole and MARLIN turrets or Blackshark heavy torpedoes).

Probably, the decision to put Oto Melara on the market is dictated by the prospect of growth in Hensoldt of which Leonardo has acquired a 25% of the share capital; Hensoldt is a very active systems engineer in Germany and abroad and offers a series of solutions in some sectors not covered by Leonardo. We recall that the first attempt to list part of Leonardo DRS's share capital on the US stock market went wrong because investors did not consider the purchase price range to be adequate; that operation was dictated by the need to obtain liquidity to strengthen company accounts and to allow for further purchase transactions. Moreover, even obtaining a higher stake, it must be said that Hensoldt would still remain in German firm hands, because the main shareholder is state-owned (Lander) and would not allow (also for legislative reasons) a complete takeover.

Surely, the terrestrial part of Oto Melara is a sort of ballast because it is based almost exclusively on orders from the domestic front, the Italian Army, which does not have huge sums to invest and assigns contracts that expand over time (also as payments ); certainly maintaining a structure to churn out a few hundred cannons, howitzers and machine guns every few years is not “cost effective” a healthy economic operation.

Why then prefer the Fincantieri solution?

Surely, the acquisition of the naval division (artillery and torpedoes) of Oto Melara / Wass by the Trieste group would enhance (and not a little) Fincantieri's ability to penetrate the market, giving it the opportunity to offer an (almost) complete package from the naval platform, to artillery, to systems (here too Fincantieri has bought companies active in the sector), up to radar. This step would allow it to challenge all other competitors with additional "cartridges" to shoot, being able to offer customers more or less complete "turnkey" solutions with obvious benefits, both in terms of time and costs, for those who propose and for those must buy, with more than one eye also to the maintenance, support and training contracts that have become essential in the negotiations.

Even in the hypothesis that Fincantieri prevails, the question of the future of the Terrestrial Division of the former Oto Melara remains open.

It is evident that maintaining the current status quo, in the long run, will not bring benefits but only burden the group's accounts. Therefore, a relaunch or within the IOC, the Consortium formed by Iveco Defense Vehicles and the former Oto Melara is desirable, with a strengthening in the armaments sector of IDV, out of the "Chinese aims", a hypothesis not entirely out of the ordinary given that the The Bolzano-based company has also been active in the RWS or Remote Weapon Station and ballistic protection sector with excellent results, or looking for an important foreign partner who will allow Fincantieri to maintain its Italian character and expand its export capabilities, the only way to keep the accounts in balance.

Obviously, since it is a company that is part of a Group that is controlled by the State, the final word belongs to the Ministry of Economy and Finance which is a shareholder of Leonardo and which can activate or not the right and veto power (Golden power) on all operations that conflict with national interests in strategic sectors such as that of the military industry.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/oto-melara-che-fare/ on Fri, 19 Nov 2021 14:30:08 +0000.