Safran weighs protest against Rome’s defence deal veto

By Tim Hepher and Giuseppe Fonte

CASABLANCA, Morocco/MILAN (Reuters) – France’s Safran (EPA:) does not exclude a protest against Italy’s decision to block part of its planned $1.8 billion purchase of the flight control systems business of Collins Aerospace, Chief Executive Olivier Andries said.

Prime Minister Giorgia Meloni vetoed the acquisition of Collins’ Italian subsidiary Microtecnica under special “golden power” rules last month, citing national security and concerns over the future of a “strategic” asset.

Speaking to reporters during a visit to Morocco, Andries said any political solution to the standoff would be apparent relatively quickly, but voiced little optimism of that actually happening.

“If not, we don’t exclude protesting. It is possible to contest decisions taking by the administration,” he said.

Meloni’s office declined comment.

Under Italian rules, Safran can appeal a takeover veto through an administrative court. Past attempts to change similar decisions have failed, however.

In April last year, an Italian administrative court ruled that the government’s veto of a purchase of seed producer Verisem by Chinese-owned Syngenta was valid, after the agrochemicals giant had attempted to reverse the decision.

Italy’s vetting mechanism is designed to protect what are considered key national assets, and has been used by governments to fend off attempts by foreign suitors to buy assets such as banks and energy firms.

Andries said a third scenario would be to go ahead without the Italian part of the deal, though this would depend on some re-negotiation.

“We remain attached to the transaction because these activities only make up 15% of the Collins activities,” Andries told reporters, adding the most attractive parts of the package of assets being bought were located in France and Britain.

“The seller is still a seller”.

Explaining the decree, which has not been fully published, an Italian government source said last month Safran did not provide sufficient guarantees it would preserve production lines in Italy.

The source also said Italy had held talks with the German government about the Safran deal and that Germany had highlighted the risk that the deal could hamper spares and services for the Eurofighter and Tornado jet fighter programmes.

Andries said Germany had signalled that it would have no objections if Safran could guarantee continued service, which it would be happy to do.

Two German government sources said last month Berlin did not tell Rome to ban the takeover but that it was important to take measures to ensure the continued provision of spare parts for the Eurofighter and Tornado jet fighter programmes.

The spat is the latest example of recurring tensions between France and Italy over cross-border transactions in recent years.

In 2017, France moved to nationalise the STX France shipyard to prevent Italy’s Fincantieri taking majority control, triggering an angry response from Rome to President Emmanuel Macron’s first big industrial policy decision.

Macron and Meloni’s right-wing government have clashed in the past year on issues including migration.