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Thales, the French defence conglomerate, on Wednesday signalled its interest in forging closer links with Italy’s Finmeccanica, as it closed the door on a satellite alliance with EADS, the Franco-German aerospace group.

Denis Ranque, Thales chief executive, said close links between Thales and Finmeccanica was “a very good thing”. But he added that the relationship could deepen further, sparking speculation the two companies might revive attempts to merge their defence electronics businesses.

A deal with Finmeccanica was put on hold last year after the French government launched a review of the defence sector. The Italian group is understood to have sought a sizeable minority stake, but also the right to veto certain decisions. This could include any deal with EADS, which has sought to buy Thales to boost its own defence interests.

Thales appeared to have scored a significant victory in its 18-month battle to fend off EADS, announcing an agreement to buy the transport and security interests of Alcatel, and its space interests, held in a joint venture with Finmeccanica. Thales will pay a minimum cash and share consideration of €1.7bn ($2.1bn) for businesses with combined sales of about €2bn and current operating profits of €135m.

The deal has the blessing of the French government which was keen to secure Alcatel’s sensitive military contracts before the telecoms equipment vendor merged with its rival, Lucent of the US.

EADS had made a last minute attempt to inject its own satellite interests into Thales, along with Alcatel, in return for a 20 per cent stake. However it had said it would withdraw if the two deals were not done simultaneously.

On Wednesday Mr Ranque insisted the decision to press ahead with Alcatel did not rule out a deal with EADS: “For Alcatel to take a larger stake in Thales is no sign of hostility towards [EADS]. If they have suggestions we are ready to look at them.”

Mr Ranque said the security and transport businesses, serving underground and rail systems, as well as oil platforms, accounted for 60 per cent of the deal’s value, he said, and completed gaps in Thales’s product portfolio.

In addition it gave Thales a stable shareholder base, he said, with Alcatel moving up from 9.5 per cent to 21.6 per cent. The government’s 30.1 per cent will be diluted to 27 per cent as a result of the issue of 26.7m shares to pay for the Alcatel assets.

In total, Thales’ top three shareholders – the government, Alcatel and Dassault, which has said it wants to sell its 5 per cent stake – will control 54 per cent compared with 46 per cent previously. The free float will fall from 48.9 per cent to 42.4 per cent.

Copyright The Financial Times Limited 2017. All rights reserved.
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