BAe and Sema squabble

European defence industry shake-up could put naval venture on new footing

By George Paloczi-Horvath

The Franco-British Sema Group this week fought off suggestions that its naval joint venture with British Aerospace might become part of Matra BAe Dynamics if Matra’s owner Lagardere succeeds in taking over French defence giant Thomson-CSF.

BAeSema command systems equip Royal Navy frigates and submarines.

A BAe spokesman this week said: `Should the Lagardere bid be successful it is British Aerospace’s intention to put our naval systems business together with those of Thomson. It is premature to talk about the detail.’

Last week BAe said its deal with Lagardere over the Thomson bid had been `widened to include BAe’s naval systems businesses’. BAe said it would provide £300m finance for Lagardere’s bid, comprising a £135m loan and £165m in convertible bonds.

But Sema immediately made a statement that BAe’s proposal `to include its naval systems business in the business activities of Matra BAe Dynamics does not extend to its joint venture with the Sema Group, BAeSema’.

It `absolutely’ repeated the denial on Tuesday.

The implications of BAeSema’s possible inclusion in an enlarged MBD are serious for Sema, as 16% of its £927m turnover in 1996 was provided by BAeSema.

`The last thing Sema wants is to lose that amount of turnover,’ said UBS analyst Ross Jobber. `Sema Group controls the joint venture and its board.’

Last Friday a UBS report said BAe naval activities offered to a larger MBD after a Thomson takeover might include BAe’s 49% stake in German naval business STN Atlas Elektronik plus BAe’s 50% stake in BAeSema.

UBS’s Jobber said: `We believe that BAeSema will inevitably eventually be injected into a broader pan-European naval systems joint venture, although issues of compensation for the loss of control by Sema will be complicated.’

Germany’s Dasa has joined BAe in backing Lagardere’s bid, while GEC has signed deals on joining any Thomson takeover with both Lagardere and the rival Alcatel Alsthom-Dassault team which is also bidding for the French state’s 58% stake in Thomson-CSF.