15 Feb 07. Safran on Thursday revealed a near €500m ($656m, £336m) hole in its accounts as a result of the controversial merger between French aero engine maker Snecma with defence and communications group Sagem. The admission raises questions over the quality of due diligence carried out before the €11bn deal was consummated. Asked what due diligence had been done, Jean-Paul Béchat, outgoing Safran chief executive and former head of Snecma, said: “There was none.” Mr Béchat’s comment, coming as the group announced a 60 per cent drop in full-year net profits, will revive criticism of management, of the French government, which holds almost 31 per cent of Safran, and advisers to the merger, which included Rothschilds, Lazards, CIC and HSBC. The deal, announced in November 2004, was greeted with near-universal scepticism for lacking any significant industrial logic. Many observers believed it was rushed through both to help Snecma resist the unwelcome advances of Thales, the part-state owned defence electronics group, and to help Sagem offset its heavy reliance on mobile phone handsets. However, the merger has failed to take hold and a vicious power battle between the two sides over the last year finally culminated in the appointment of former finance minister Francis Mer as chairman of the supervisory board in place of Sagem’s Mario Colaiacovo. As part of the peace deal, Mr Béchat was forced to set a retirement date in September.
In the heat of the in-fighting Mr Bechat had announced possible accounting irregularities in the Sagem defence and security business, which yesterday were quantified at a total of €191m, including restatements for prior years and a €106m hit to shareholders’ funds, as well as adjustments on a long-term contract. The findings followed an independent inquiry by KPMG and Ernst & Young, Mr Béchat said. Nevertheless, the charges are being disputed by the group’s former auditors Deloitte and Constantin, who have added a qualification to the group’s accounts that the effect on shareholders’ funds should be just €16m. Safran also announced a €101m loss for 2006 in the defence and security division while the communications business recorded a deficit of €176m. In addition it suffered a €27m tax hit after a fiscal inquiry. In total the losses and charges announced yesterday arising from the old Sagem businesses come to roughly €500m. Despite the drop in net profit from a restated €444m to €177m, affected by exchange rates as well as charges, Mr Béchat promised that Safran would overcome its current difficulties to return to normal profitability by 2008. The troubled mobiles business would return to near break-even this year, he said, while defence and security would be profitable. He predicted an operating margin for 2007 of more than 5 per cent. Meanwhile, the old Snecma engine business delivered improved results, with operating income up from €456m to €561m. Aircraft equipment suffered a decline from €212m to €197m. Total turnover rose by 7 per cent to €11.3bn. (Source: FT.com)
09 Feb 07. DaimlerChrysler has placed a 7.5 percent stake in EADS with a public-private consortium in a €1.5bn deal that keeps the Franco-German balance of power at the aerospace group. The world’s fifth-biggest automaker said Friday the indirect placement, which has been in the works for months, effectively reduces DaimlerChrysler’s (Charts) EADS stake to 15 percent as planned but leaves it with the stake’s voting rights.
12 Feb 07. VT Group (VT) has strengthened its US business with the acquisition of MILCOM Systems Corporation (MILCOM) for a debt free cash consideration of $42.5m. For the full 2007 calendar year, MILCOM is expected to generate revenues in excess of $100m and a profit margin of approximately 5%. Based in Virginia Beach, Va. and with offices throughout the United States, MILCOM designs, plans, installs and supports electronics and communications systems, primarily for the US Government. The principal shar