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Leonardo Finmeccanica

On 28 April 2016 the Shareholders' Meeting approved Finmeccanica’s new name. From now on, it will be Leonardo - Società per Azioni. After sixty-eight years of history, the brand name that has identified the high technology industry in our country, from the post-war period to the present time is renewed in the very modern name of Leonardo da Vinci, innovator in his times and recognised as universal symbol of genius and creativity applied to all fields of inquiry.

The name change was said to be the logical conclusion of a path of profound renewal that got its start with the transformation of 1 January 2016 – from financial holding to One Company, a single industrial company, integrated and concentrated on the key sectors of aerospace, defence and security. Leonardo thus took the baton of an important industrial development, which started even before Finmeccanica, with the goal of representing worldwide the new image of a global and technologically advanced company.

Finmeccanica was Italy’s leading industrial group in the high-technology sector and ranks among the top ten global players in Aerospace, Defence and Security; sectors which generate around 85% of revenues and 80% of orders. The Group operates in three strategic sectors - Helicopters, Defence Electronics, Security and Aeronautics. Finmeccanica was a leading international player in defence systems and has a strong presence in the space sector (through the Space Alliance with Thales) where it has a distinctive presence in the satellite services market. Furthermore, the group has substantial expertise and a well-established position in the global transport and Energy markets.

The Finmeccanica group has its headquarters in Italy, with permanent sites with significant production assets – in addition to Italy - in three other domestic markets: the UK (with 8,712 employees), the US (with 8,938 employees), and Poland (with 3,224 employees). In Europe the group has also built up a significant presence in France and Germany, as well as establishing a significant network of partnerships in high-potential countries worldwide. In total the group employed in excess of 67,000 people in 2012, of whom 43% worked in some 50 countries across five continents. n 2012, Finmeccanica generated revenues of EUR 17.2 billion and obtained orders totalling EUR 16.7 billion. Finmeccanica has an order book of EUR 45 billion and invests around 11% of its revenues in Research and Development.

The year 1992 was a milestone in Finmeccanica's history since the Group's shares were listed on the stock exchange, under its new name Finmeccanica S.p.A. (Società per Azioni), through a merger with its subsidiary SIFA. In the late 1990s, Finmeccanica was owned approximately 65 percent by the Italian government. In 2000, the state-ownership stake in Finmeccanica decreased with the offer on the Stock Exchange of almost all of IRI shares, for a value of more than €5 billion. Today, the Italian Ministry of the Economy holds approximately one third of the shares and the remaining part was in the market.

In the late 1990s, had about 28,000 of its 60,000 total employees dedicated to defense related work and had 1997 defense and aerospace billings of nearly $3.5 billion. About 65 percent of Finmeccanica's annual revenue comes from defense and aerospace, and two thirds of the annual revenue was from export markets.

Alenia Aerospace was the largest of the Finmeccanica subsidiaries with 1997 revenues of over $1.9 billion. Most of that was concentrated in the EF-2000 Eurofighter program and the start of a new C-130 transport version in conjunction with Lockheed Martin and other avionics systems partners. Alenia Defensia was the second largest Finmeccanica subsidiary with 1997 sales of approximately $2 billion. Defensia's main product lines were: radar, missiles, naval artillery and radar systems, and avionics. Alenia Spazia with 1997 orders of approximately $688 million was focused on the international space station to support the European Space Agency (ESA) and NASA requirements, the SICRAL communications satellite for the Italian military, the European Helios 1 military observation satellite and other communications satellites for commercial applications. Agusta, currently a helicopter and systems company, was the smallest of the subsidiaries with 1997 orders of $526 million.

The "Società Finanziaria Meccanica Finmeccanica" was set up in 1948 by the "Istituto per la Ricostruzione Industriale" (IRI) to manage State participation in the mechanical and ship-building industries which would be acquired by IRI during its first fifteen years of activity. Finmeccanica was given a clearly defined task and substantial resources to restructure important companies which would become the core of the mechanical industry for the next fifty years: Ansaldo, Alfa Romeo, San Giorgio, Sant'Eustachio, Navalmeccanica, Cantieri Navali dell'Adriatico. Attention focused on sectors such as automobiles, ship building, railways and industrial machinery, with an eye on the emerging electronics sector.

The quest for a more competitive dimension and the general trend towards better structuring of the whole state participation system, led to a series of company transfers, mainly with EFIM, but also with other financial branches of IRI. Against this background, Finmeccanica sold off the railway companies and the electronics firms (transferred to STET), and acquired several companies in the electro-mechanical sector. In the early 1970s, Finmeccanica changed its organizational structure. The Group acquired a sizable dimension with participation in several industrial sectors: automobiles (with Alfa Romeo, acquired in 1948), the thermo-electro-mechanical sector (with Ansaldo, a long-standing company founded in 1854) and the aerospace sector (with Aeritalia, set up 50/50 with FIAT in 1969).

The 1973 energy crisis forced Finmeccanica to review the policy it had been pursuing up until that time. The new objectives were restructuring, internationalization, and achieving a competitive dimension. Although these objectives were similar to those of the early 1950s, they now referred to a very different industrial scenario. During the early 1980s, Finmeccanica began to focus on the electro-mechanical and aerospace sectors, gradually consolidating its activities. The year 1987 marked the end of this restructuring phase which was essential to enable the Group to develop internationally. In 1989, IRI decided that Finmeccanica should re-acquire Selenia, Elsag and SGS, three companies specialized mainly in the electronics field, previously transferred to STET. At this point, Finmeccanica's range of activities included civil systems, automated factories, command and control systems, missile systems, biomedical apparatus, robotics, microelectronic components, alongside the traditional sectors of energy, transport, industrial plant, and aerospace.

In 1990, Elsag acquired Bailey thereby expanding its significant presence in the field of automated processes and services. In 1991, Ansaldo Energia was set up with the merger of Ansaldo GIE and Ansaldo Componenti, followed by the acquisition of Fabbrica Turbine and Caldaie Legnano. Setting up Elsag Bailey Process Automation, together with subsequent acquisitions, enabled Finmeccanica to become the second largest group in the world for this sector. The acquisition of Breda Costruzioni Ferroviarie led to the creation of an integrated railway group able to compete with leading European operators.

Italy's grand design for defense consolidation: sector oriented joint ventures cut across borders but still safeguard the strengths of its national industry. This has resulted in several joint ventures established as test cases for Italy's defense consolidation strategy. Finmeccanica began the transformation in 1994 when it took over the state-owned Ente Partecippazioni e Finanziamento Industrial Manifatturiera (EFIM) Group. This Group included Italy's major helicopter manufacture, Agusta, an electronics company (SMA), the sensor company Galileo, the light artillery maker Breda, and the naval arms and armaments producer OTO-Melara. To assimilate these capabilities, Finmeccanica created a new management structure dividing its defense operations into three groups: helicopters, avionics and equipment, and armaments. This acquisition gave Finmeccanica control of about 70 percent of Italy's defense industry. As a part of the acquisition, the Italian government also guaranteed to Finmeccanica a stable order flow, sustained R&D funding at previous levels, financing of restructuring costs, and help promoting exports. One of the government's rationales in establishing Finmeccanica as the single Italian missile manufacturer was to posture Italy to play a more active role in the anticipated restructuring of Europe's missile industry.

Finmeccanica was also heavily engaged in the commercial market. In 1994, defense revenues accounted for only 17 percent of the company's total revenues. After restructuring was completed in 1995, Finmeccanica began to focus on export sales, with a goal of rising to a level of 70 percent of its annual defense revenues coming from the export market. To support this goal, Finmeccanica depended on a change in government policy that will relax the restrictions on export sales that are automatically prohibitive to countries no longer embargoed by the United Nations. The planned increase in export sales was expected to come from four major operating companies: Agusta (helicopters), Otobreda (ordnance and vehicles), FIAR (avionics and systems), and Alenia (aerospace, especially tactical missiles). Finmeccanica's international business strategy focuses on joint ventures rather than mergers with larger European groups for fear of eventual takeover.

In 1995 Finmeccanica's parent state-owned company, Instituto per Ricostruzione Industriale (IRI) was heavily in debt. This led to considerations within the Italian government to split or sell Finmeccanica, which was one of the most attractive IRI assets. IRI viewed the most attractive option to be the split of Finmeccanica, privatizing the civilian sector elements to generate revenue while keeping the defense and aerospace businesses under state ownership. Finmeccanica leadership opposed this plan, arguing that future survival depends on maintaining a diversified civil-military high technology business base.42 Nevertheless, in May 1997 IRI announced intentions to divide Finmeccanica's assets into three companies (Alenia Aerospace, Alenia Defense, and Agusta) and privatize them separately.

This action led to the prompt resignation of Finmeccanica's CEO, Fabiano Fabiani, arguing that this step would lead to the "transformation of its best industrial properties into subsidiaries of competing foreign groups." The IRI approach was diametrically opposite to the consolidation initiatives that Fabiani had been pursuing over the last three years, although in pursuit of the same declaratory objective- to facilitate international agreements. Italian defense industry analysts expressed concern that the reversal would increase costs and inject delay, which in turn may prevent Italy from full participation in European-wide consolidation and restructuring.

In 1998 Finmeccanica's leadership argued that she had been able to maintain her competitive position in radar, missiles, naval weapon systems, satellites and fighter aircraft. At the same time, she urgently needed to pursue four priority areas: partnership entry into the Airbus consortium; completing the GEC-Marconi joint venture arrangement; integrating Agusta with either Westland or Eurocopter; and concluding a space-sector alliance with either the Matra-Marconi Space-DASA or the Alcatel-Thompson-Aerospatiale groups. These were seen to be strongly interrelated measures to both insure Italian participation in the major European consolidation initiatives and also to motivate Italian industry to achieve the level of modernization and efficiency associated with the high standards of the UK.

Finmeccanica began operating in the microelectronics sector in 1999 through a merger with MEI, an Italian company (equally shared with French State participation) which owned 22% of ST Microelectronics, a leading semiconductor firm. The business lines, first organized as divisions, were grouped into operating companies, homogeneous and coherent with the international development strategy, leaving Finmeccanica the functions of strategic and industrial guidance and control. Alenia Spazio and Agusta were established in 2000, Galileo Avionica and Oto Melara in 2001 and Alenia Aeronautica in 2002.

Thanks to the agreement completed in 2005 with BAE Systems, the Group acquired important technological and production assets in the UK and reconfigured its entire Defence and Security Electronics sector. This was how the “SELEX family” was started, a name which evokes the historic one of Selenia, the company which started Finmeccanica’s adventure in radar and electronics 40 years ago. The "SELEX" companies currently include SELEX Sistemi Integrati, SELEX Galileo, SELEX Communications and SELEX Service Management, with its subsidiary Seicos. Later, the Defence and Security Electronics sector would be further strengthened with the acquisition of the Italian company Datamat, merged into the new asset Elsag Datamat, and the British company Vega. With the whole of these companies, Finmeccanica became part of a narrow list of international players in integrated systems and laid the basis for its subsequent growth in the American market.

The year 2005 was also the year of the Space Alliance, thanks to which Finmeccanica became the leading European company in the space industry. With Alcatel, which became a part of Thales in 2007, the Group formed two joint ventures, today called Thales Alenia Space (manufacturing activity) and Telespazio (satellite services). These two companies play a primary role in all the main international space programmes: GMES for the environment; Galileo and EGNOS for satellite navigation: COSMO-SkyMed, Syracuse, Sicral among others for Earth observation for civil and defence purposes. In addition, it takes part in scientific and exploration projects of the caliber of GOCE, Herschel & Planck and ExoMars.

On 22 October 2008, Finmeccanica in fact completed the acquisition of 100% of the American group DRS Technologies, leader in the supply of products and services for Defence and Security Electronics. It was the largest acquisition ever carried out by a European company in the American Defence industries sector and represents the coronation of Finmeccanica’s long journey towards growth.

The entrance of DRS not only allowed the Group to establish a stable and important positioning in the USA market, otherwise difficult to get into, but it also allowed it to develop a wide range of technological and productive synergies, that strengthen it even more in the sectors of large integrated systems, based on complex architecture and network-centric approaches, as well as in the production of avionics and electro-optical equipment and systems, land and sea command and control systems, air traffic control systems, integrated communications systems and networks, private mobile radio communication systems and services with added value in the Information Technology field.



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Page last modified: 17-01-2017 19:40:52 ZULU