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BAE Systems and Finmeccanica achieve an important milestone in the Eurosystems transaction

22 Mar 2004

BAE Systems and Finmeccanica are pleased to announce that they have achieved an important milestone in the Eurosystems transaction.

The Eurosystems partnership - initially announced with the signing of the preliminary MoU on July 3, 2003 - represents the common will of Finmeccanica and BAE Systems to reinforce their strategic co-operation, through an extension to other business activities. To this aim, a Strategic Steering Council will be established in order to oversee the co-ordination in all relevant areas of common interest, identifying opportunities either within the existing joint ventures or by the formation of new entities.

The companies have agreed in principle the businesses to be included in the transaction and their respective valuations.

The companies will form two joint ventures each under the clear operational control of one of the parents:

* A Systems Integration business, to be majority owned by BAE Systems, with capabilities in information systems and sub-systems, combat management systems, land and naval radar.
* An Avionics business, to be majority owned by Finmeccanica, with capabilities in sensor systems, airborne radar, mission systems, electro-optics and electronic warfare systems.

Recognising the relative sizes of the companies communications businesses, it has been agreed that Finmeccanica, through Marconi Selenia Communications, will acquire the relevant BAE Systems communication activities in the UK. These activities will considerably strengthen the capability of Marconi Selenia Communications in the UK.

It has also been agreed in principle that Finmeccanica will acquire the Air Traffic Management activities of Alenia Marconi Systems. The companies believe that these activities will be more fully developed through closer alignment with the related Finmeccanica activities in this area, such as those ones carried out their in the Space field.

The overall turnover of the activities involved in the transaction is around 3.7 bn.

Sir Richard Evans and Pier Francesco Guarguaglini, the Chairmen of the respective parent companies, said in a joint statement today: Achieving this milestone is further evidence of the developing strategic relationships between our two groups. Thanks to Eurosystems, leading global players will be established that can deliver advanced system and sensor solutions to their customers. The agreement announced today represents the major decision point to progress to complete this transaction by mid-year.

The next step is for the companies to conduct due diligence and to prepare the contractual documents.

About BAE SYSTEMS

BAE Systems is an international company engaged in the development, delivery, and support of advanced defence and aerospace systems in the air, on land, at sea, and in space. The company designs, manufactures, and supports military aircraft, surface ships, submarines, radar, avionics, communications, electronics, and guided weapon systems. It is a pioneer in technology with a heritage stretching back hundreds of years and is at the forefront of innovation, working to develop the next generation of intelligent defence systems. BAE Systems has major operations across five continents and customers in some 130 countries. The company employs more than 90,000 people and generates annual sales of approximately 12 billion through its wholly owned and joint-venture operations.