Importance Score: 75 / 100 🔴
Aerospace Giants Mull Space Business Merger
PARIS — In a move to bolster their competitive edge in the dynamic satellite market, three prominent European aerospace firms aim to finalize their decision by next month regarding a potential consolidation of their space divisions. The merger, intended to create a larger, more competitive European space entity, may require several years to secure regulatory approvals.
Decision Looms for Airbus, Thales Alenia Space, and Leonardo
During the Paris Air Show on June 17, Leonardo’s Chief Executive, Roberto Cingolani, announced that discussions between Airbus Defence and Space, Thales Alenia Space, and Leonardo concerning a merger of their space operations were nearing a critical “go/no-go” juncture.
- “By the end of July, we would like to have a global go/no-go about the feasibility of the initiative,” Cingolani stated, emphasizing the importance of assessing antitrust concerns, conducting thorough financial due diligence, and evaluating the potential for “value creation.”
- He added, “I like to say that one plus one plus one should be bigger than three, otherwise we don’t do it,” underscoring the necessity for the merger to generate substantial synergistic benefits.
Project Bromo: Aims and Objectives
The discussions, ongoing since the previous year and informally known as “Project Bromo,” focus on establishing a more substantial space enterprise. The goal is to better compete against industry disruptors like SpaceX in the rapidly evolving satellite sector.
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- Airbus Chief Executive Guillaume Faury expressed support for the consolidation strategy during an investor call in February, drawing parallels with the formation of MBDA, a successful European missile manufacturer created through the amalgamation of business units from three different companies nearly 25 years ago.
- “What we expect is to gain scale and speed by consolidating the business,” said Faury.
MBDA Model as Inspiration
Cingolani confirmed that the MBDA model is being considered for the prospective space company, highlighting potential adjustments to governance structures due to the differences in product offerings. “Definitely, the inspiration comes from the MBDA model,” he affirmed.
Comprehensive Evaluation Underway
Currently, a team of 90 individuals from the three companies are meticulously examining the potential integration, including access to data rooms for financial reviews. Cingolani noted, “We see if we have the same opinion about the value of the assets we contribute to the company.”
Focus on Synergies and Innovation
The evaluation also encompasses identifying opportunities for enhancing existing technologies and products, along with developing novel offerings through the merger. Cingolani indicated that these efforts are in their final stages, stating, “We are really at the last weeks… We are up to the end.”
Optimism and Alignment
Speaking at the Paris Air Forum on June 13, Faury conveyed optimism regarding the potential agreement to merge the space businesses. “The three of us are very aligned,” he remarked, emphasizing the rare consensus on understanding the competitive landscape.
Creating a European Champion
Alain Fauré, Head of Space Systems at Airbus Defence and Space, underscored the objective of creating a “European champion” capable of competing effectively on a global scale. He highlighted the existing fragmentation within the European space sector, citing numerous projects and players.
Addressing Fragmentation and Building Critical Mass
Fauré contended that consolidating the space units would create the “critical mass” currently lacking in Europe. “It can create a synergy. We can have, as well, the strength of the three companies to create this champion,” he said, citing scaling effects and increased volume.
Antitrust Review Timeline
Fauré also cautioned that, should the companies decide to form a space joint venture, securing clearances from European antitrust authorities would be a lengthy process, potentially requiring up to two years before formal operations could commence.
Expected Timeframe
Cingolani echoed this timeframe, emphasizing that the antitrust review process could extend for a couple of years, contingent upon a positive “go/no-go” decision. “We have a couple of years waiting for the antitrust to create the company,” he stated.