Microwave Journal

EuroSystems Transaction Completed

June 6, 2005

BAE Systems plc. has completed the EuroSystems transaction agreed with Finmeccanica SpA. Under the transaction BAE Systems Avionics Ltd. has merged with Galileo Avionica SpA to form a new Avionics business owned 75 percent by Finmeccanica and 25 percent by BAE Systems. At completion BAE Systems received the adjusted amount of £374 M in cash and will receive a further adjusted amount of £268 M upon the exercise after May 2007 of BAE Systems’ stated option or the exercise at any time of Finmeccanica’s call option over the 25 percent stake.

The agreement also sees the dissolution of the 50/50 AMS joint venture of BAE Systems and Finmeccanica. At completion BAE Systems paid Finmeccanica an equalising amount of £50.5 M in cash to account for the difference in value between AMS’s UK and Italian operations. In addition, Finmeccanica has acquired AMS’s UK Air Traffic Management business for £6.5 M cash and the assumption of debt. Furthermore, BAE Systems’ UK Communications business has been sold to Selenia Communications Ltd., a wholly owned subsidiary of Finmeccanica, for £25.4 M in cash.

As a result of the complete transaction both company’s have achieved the mutual goals of securing control and clear management responsibility for these significant European defence industry businesses. BAE Systems will now form an Integrated System Technologies business by combining the capabilities of AMS’s UK operations and BAE Systems’ C4ISR Networked Systems and Solutions business.