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Thales and DCN announce intention to combine naval businesses

15 December 2005

Joint Press Release

Michèle Alliot-Marie, Minister of Defence, Thierry Breton, Minister for the Economy, Finance and Industry, Jean-Marie Poimboeuf, Chairman and Chief Executive Officer of DCN and Denis Ranque, Chairman and Chief Executive Officer of Thales, today signed a joint declaration of intent with a view to combining the French naval businesses of Thales and DCN within DCN and the acquisition by Thales of a 25% interest in DCN.

Both industrial partners are strongly committed to developing closer ties through this operation, which has the full support of the French State. It represents a significant milestone in the construction of a European naval defence industry.

"Closer ties between European industry players are crucial to Europe's ability to sustain an independent industrial capability over the long term," said Defence Minister Michèle Alliot-Marie.

The project is a continuation of a process that has included the formation of Armaris in 2002 and successful cooperation between Thales and DCN on numerous French and export programmes.

Since enactment of the law of 31 December 2004 authorising the opening of DCN's share capital, the two partners have sought to move to a new level of cooperation in order to combine their R&D efforts, share their know-how and organise the complementary areas of expertise of their respective companies.

The project, which is expected to be finalised by the summer of 2006, involves transferring to DCN the non-equipment businesses of Thales Naval France, the activities of the partners' joint venture Armaris and its subsidiaries, and those of MOPA2, the joint company set up for France's second aircraft carrier. The scope of the agreement also includes Thales' interest in Eurotorp, the European lightweight torpedo consortium.

At the same time, Thales will become DCN's industry shareholder, owning 25% of the company alongside the French State which will retain 75%. Thales will have the voting rights needed to play an active role on the Board of Directors. After two years, under the terms of a new shareholders' agreement, Thales will have an option to increase its interest to 35%, in particular by contributing additional industrial assets to the company.

The operation strengthens DCN's position as an integrated naval defence contractor. DCN will generate revenues of approximately 3 billion euros, with an order book in excess of 8 billion euros and some 13,300 employees.

The two industrial partners stress that this operation is part of the consolidation of the naval defence sector in Europe. "By consolidating our naval businesses, we intend to create a leading European prime contractor for major naval programmes with the capacity to play a pivotal role in international markets. The operation represents a real development opportunity for our two Groups and their staff by putting us both in the best position to meet our customers' requirements in the future," said Jean-Marie Poimboeuf and Denis Ranque. "We will do everything in our power to make this project a success, and trust it will encourage closer ties with other European partners."

About DCN
DCN is a major player in the European and world markets for high-added-value naval defence systems. As a prime contractor, shipbuilder and systems integrator, the company offers resources and expertise spanning the entire naval defence value chain and product lifecycles. DCN provides its client forces with a wide range of innovative solutions: warships, services, equipment and strategic systems.

DCN generated revenues of 2.6 billion euros in 2004 with close to 12,700 employees.