(July 6): Thales SA trumped rival French defence firm Safran SA in the contest to acquire Exail Technologies SA and tap into demand for submarine drones that’s been surging due to the Strait of Hormuz mine crisis.
Thales will pay €134 per Exail share, a 44% premium to the unaffected price on June 25 and implying an enterprise value of €3.9 billion, according to a statement on Monday. It has signed a binding agreement for the 35.51% stake owned by chief executive officer Raphaël Gorgé and his family, and plans to acquire the rest of the maritime robotics company via a mandatory tender offer.
“While this acquisition may not be cheap, we view positively Thales reinforcing its defence position,” Jefferies analysts wrote in a note.
The move “complements Thales’ portfolio in naval solutions,” including sonars, radars and combat systems, as illustrated by the expected synergies of €90 million by 2032, they added.
Exail shares rose as much as 4.2% in Paris. They were trading at around €126 at 1pm local time, taking their gain since the start of the year to more than 50%. Thales rose as much as 2.2%.
Defence contractors are cashing in on a large-scale European military buildup triggered by Russia’s war on Ukraine and the US pullback from the Nato military alliance, which is fostering increased dealmaking and partnerships in the sector.
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Italy’s Fincantieri SpA on Monday announced it had agreed to buy majority stakes in four underwater technology companies for an initial €600 million investment, lifting its shares by the most since October.
Exail competes in submarine drones with bigger conglomerates including Thales, Sweden’s Saab AB, and Norway’s Kongsberg Gruppen ASA. It has flagged huge demand for its systems linked to the mining of the Strait of Hormuz, a key passage from the Persian Gulf for cargoes of oil and gas. Its shares already took off early last year when it unveiled an order worth about €400 million for mine-hunting drones.
The market for robotic underwater warfare and mines “is worth €85 billion today and is expected to grow eightfold” by 2030, Thales CEO Patrice Caine said at a news conference in Paris. “The outlook is simply incredible — it is fantastic. We will even need to hire more people.”
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Safran was in exclusive talks to buy the Paris-based manufacturer at a price of €128.5 a share before the two firms announced the end of negotiations on Friday, saying they had been “unable to reach mutually acceptable terms”.
Before reaching an agreement with Thales, Exail explored a capital increase with investment funds, though conditions weren’t satisfactory, CEO Gorgé said at the joint news conference. The company risked missing opportunities in the booming market for submarine drones if it remained independent, he added.
The price of the planned Exail transaction will help “crystallise” the terms under which Thales will buy back bonds and preferred shares owned by UK investment firm ICG Plc in Exail’s main unit, Caine said.
The closing of the acquisition of the Gorgé family stake is expected by the third quarter of next year, pending antitrust and regulatory approvals, Thales said. It will then file a mandatory tender offer for 100% of Exail shares, with closing expected at the beginning of 2028 at the latest.
The Gorgé family holding company plans to use the proceeds from the sale of its Exail stake to pursue new projects, the CEO said. One of its subsidiaries is developing a small modular nuclear reactor, and is taking part in a €1.5 billion tender to supply several customers in Finland, he added.
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