Finmeccanica changes tack on US sale
Finmeccanica has taken down the For Sale sign it posted last year over DRS Technologies, the US electronics business it acquired for $5.2bn in 2008 just before defence spending collapsed.
A brighter outlook for defence and a better than expected performance in the first half of this year have encouraged the Italian aerospace and defence group to keep the business. Nor is the group actively looking for a US partner to take a stake in DRS, said a person close to the situation, though this could be possible for some activities in the future.
The decision marks a U-turn by Mauro Moretti, the chief executive appointed by the Italian government last year to shake up the 30 per cent state-owned group. Mr Moretti suggested last summer that all or part of the division could be sold as part of a business review and debt reduction programme. Carlyle, the US buyout group, was reported to have expressed an interest.
Mr Moretti is expected to update investors on plans for the division when Finmeccanica reports interim results after the market closes on Thursday. These are expected to show the group’s restructuring is on track, with profits likely to come in above market expectations, in part due to DRS which had annual sales of $1.87bn in 2014.
The division is expected to return to profitability this year and asset sales accounting for $200m in turnover will be announced in the coming months.
Mr Moretti has said that the group’s annual sales will shrink by 20 per cent as a result of the restructuring. At least 3,000 of its 54,000 jobs will go over the next two years, partly through disposals, including the €809m sale of its train and rail signalling division to Hitachi.
The challenge is also to restore the group’s investment-grade credit rating, a priority for the Italian government as Finmeccanica is regarded as a government-related issuer by some agencies.
The purchase of DRS left Finmeccanica with a crippling €4.1bn net debt and cost the company its investment grade credit rating. Mr Moretti said earlier this year that DRS sales had halved since acquisition, however he has been encouraged by strong trading in recent months, including orders from the Canadian Armed Forces.