Brothers in arms: Spanish defence merger raises conflict questions
EM&E’s co-founder seeks deal with aspiring national champion Indra — whose chair is his elder sibling
A top Spanish defence entrepreneur has made the case for the weapons maker he co-founded to be acquired by aspiring national champion Indra, batting away conflict of interest questions over deep entanglements he and his brother have in both companies.
Javier Escribano, a rough-edged entrepreneur who is chair of EM&E, said his company would give state-backed Indra the industrial “muscle” and technology it needed to rival top European groups.
“In a timeframe of five to 10 years we could be a business with much, much greater volume, which is what the Italian, British, German and French companies have,” he told the Financial Times, referring to the likes of Leonardo, BAE Systems, Rheinmetall and Thales.
The deal would give radar specialist Indra a clearer presence in the world of lethal force. EM&E’s signature weapons systems for tanks combine high-calibre gun barrels with cutting-edge cameras and software for identifying targets and precision firing.
Indra, which is valued at almost €7bn and part-owned by the Spanish state, would also gain a much-needed foothold in Ukraine, where it has not signed any big supply contracts since war broke out with Russia.
Heavy metal gun turrets marked with “UKR” await shipment at EM&E’s factory outside Madrid, where Escribano interrupts a tour to give a corrective tip to an employee shaving a component held in a vice.
But the Escribano family’s objectivity on a potential deal with Indra is in question because of a corporate governance snarl.
Javier’s brother and fellow EM&E co-founder Ángel Escribano is chair of Indra. With a 50 per cent stake each in EM&E, the brothers would be big beneficiaries of a takeover.
In addition, EM&E is already Indra’s second-biggest shareholder, owning a 14.3 per cent stake worth almost €1bn that has given Javier a seat on the bigger company’s board alongside his brother.
EM&E reported sales of €355mn in 2024 and is predicting they will rise to €465mn this year then more than double to €1.3bn by 2030. Analysts say they cannot value the company because it has not disclosed enough about its finances. The Spanish press has suggested a valuation of €1bn-1.5bn.
Javier Escribano, 51, bristled at the suggestion a deal would be a takeover of EM&E by Indra, declaring that it would instead be a “merger”.
He stressed that he and his brother, who is 54, were determined to keep working and would be paid in Indra shares, which he said showed they had no interest in cashing out.
“We’re young, we’re in our early fifties, and if we just wanted to sell our shares [for cash] we could go home or head to the park to feed the ducks in our tracksuits and act like retirees,” he said. “But we’re here giving it our all.”
Escribano said Indra had considered a deal with EM&E under previous chair Marc Murtra, who moved to Telefónica in January and was replaced by Ángel Escribano.
Indra chief executive José Vicente de los Mozos has advocated for acquiring EM&E, arguing that the two businesses together could bid for European contracts for anti-drone and anti-aircraft systems that Indra alone could not win.
“There is a conflict of interest, obviously. I was the first to say it on the very first day,” de los Mozos told analysts in July. “But a conflict of interest does not mean that a transaction cannot take place.”
Ángel Escribano has excluded himself from any discussions on the deal at Indra, as has his brother in his capacity as an Indra director.
The company in July set up an ad hoc committee of four independent directors to evaluate a possible deal to ensure “the proper management of conflicts of interest” and good governance.
On the day the committee was announced one independent director resigned from the board for “personal reasons”. At the end of August one of the directors on the ad hoc committee also resigned for “personal reasons”.
Indra said the committee’s work was advancing but there was no set deadline for it to reach a conclusion. Any deal would need to be approved by the board, excluding the brothers, then Indra shareholders.
Indra’s biggest shareholder is the Spanish state, which owns 28 per cent. Spain’s government is eager for the company to join Europe’s defence big league, although it is refusing to lift the country’s military spending by as much as the Trump administration wants.
Goldman Sachs is advising Indra while the ad hoc board committee has hired Morgan Stanley. EM&E is working with JPMorgan and Santander.
“There could be a conflict of interest if we were playing both sides,” Escribano said. “But think about this: we are not the ones who are going to put a price on the organisation, because top-tier global banks are going to do that.”
Escribano said a weakness of Spain’s defence sector was that most of its companies were suppliers of “subsystems” — mainly radars in Indra’s case — that other companies integrated into armoured vehicles, jets or ships.
EM&E, by contrast, “is a company that sells a weapons system that we send to you in a box. You screw it on, it works, and you fire,” Escribano said. “That is extremely important because I own the intellectual property, I have commercial control of the product, I set the price.”
Its main competitors in weapons systems are Rafael and Elbit Systems, which are both Israeli.
Unusually for European defence companies, EM&E did not grow by serving its own government, because Spain’s defence spending was so meagre for so long. Saudi Arabia was its first big defence client and continues to buy from the company, as does the United Arab Emirates.
With European defence spending now booming, Escribano said EM&E’s ambition was to grab a share of that pie, including in Germany. Another target is the UK, where EM&E is hopeful of signing a deal to sell mortar systems. “Breaking into the British market would give us a stamp of quality,” he said.
On the Indra-EM&E deal, Sepi, the state-owned entity that holds Spain’s Indra stake, said it would “respect the analysis provided by the company on the matter”. Sapa, a defence group that owns 8 per cent of Indra, declined to comment.
Another Indra shareholder Joseph Oughourlian, who owns 7 per cent as founder of investment fund Amber Capital, said: “EM&E has what Indra lacks: production sites. I don’t buy the argument that Ángel Escribano has a huge conflict of interest. The deal makes sense and it should have been done a long time ago.”