Italians secure UK defence deal

Italian aerospace and electronics group Finmeccanica has emerged as a major player in the UK defence technology sector
following a £600m deal with BAE Systems.

Italian aerospace and electronics group Finmeccanica has emerged as a major player in the UK defence technology sectorfollowing a £600m deal with BAE Systems.

A complex agreement between Finmeccanica and the UK defence giant places a large chunk of BAE’s avionics operations under the Italian group’s control in return for £380m.

Finmeccanica claimed the deal would establish it as Europe’s second-largest defence electronics group behind France’s Thales, and number six in the world.

It also underlines the Italians’ determination to establish themselvcs as a force in the UK defence sector, coming soon after thecompany assumed total control of helicopter manufacturer Agusta-Westland by buying out former co-owner GKN.

Under the deal with BAE, Finmeccanica will own 75 per cent of a newly created avionics business worth about £1bn. The new venture will include BAE’s UK businesses operating in the areas of electro-optics, airborne radar and electronic warfare. It will also include Galileo Avionica, Finmeccanica’s own avionics business.

The agreement leaves 25 per cent of the new avionics unit under BAE ownership, but gives Finmeccanica the right to buy the remaining stake for an additional £269m at any time.

Other elements of the multi-faceted deal include the acquisition by Finmeccanica of the two companies’ joint air traffic control operations. AMS, another joint venture between the two, will be dissolved, with BAE taking back full control of the UK operation.

Finmeccanica’s confirmation as a force in the UK defence sector coincided with a coup for AgustaWestland, which defied the odds to be chosen as the new helicopter supplier to Marine One — the presidential chopper fleet that flies George Bush and other US VIPs to and from the White house.

AgustaWestland, with US partners Lockheed Martin and Bell, secured the order for 23 specially modified versions of its EH101 helicopter, which is in service with the Royal Navy and others around the world.The £900m order had looked certain to go to its ‘all-American’ rival bidder Sikorsky, part of US engineering giant UTC, which has supplied choppers to presidents for half a century.

But a concerted push by the AgustaWestland consortium — reportedly including lobbying by Tony Blair on its behalf — secured the business, causing howls of outrage from those backing Sikorsky that the president would be ferried around in a ‘European’ aircraft.

However, celebrations over the Marine One deal at AgustaWestland’s UK base in Yeovil, Somerset, soon turned sour. Just days after announcing the US contract win, the Italian parent group said more than 600 employees in the west country faced the axe due to a declining general order book.