« CONVERGENCE »
An important step forward in the
consolidation of the European naval sector
STRONG COMMITMENT FOR THE FUTURE…
A MAJOR INDUSTRY INITIATIVE
DCN and Thales confirm their commitment to combining
their strengths
STRONG POLITICAL SUPPORT
Today’s announcement by the French government about
closer ties between the naval defence businesses of
Thales and DCN signals strong support for the
consolidation of our French naval businesses...
A SPRINGBOARD FOR EUROPE
… and it is also a springboard for the consolidation of
the naval industry at the European level.
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COMBINE TO GROW
Asia-Pacific
- 2 main players
- €5 bn / year
USA
- 4 main players
- €11.6 bn / year
Asia
USA
 Daewoo
 General Dynamics
 Hyundai
 Northrop Grumman
 Lockheed Martin
 Raytheon
UK
Europe
- 11 main players
-€ 9.1 bn / year
 BAES
 VT Group
 Thales UK
Germany
 TKMS
 Lürssen
Atlas Elektronik
France
 DCN
 THALES
Armaris
Spain
 Navantia
Italy
 Fincantieri
 Finmecanicca
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Orrizonte
Closer ties between European
industry players are crucial to
Europe’s ability to sustain an
independent industrial capability
to meet its needs over the long term.
A CHANGING MARKET
New Navy requirements
 Combat systems increasingly integrated
with platforms
 Requirement expressed in terms of
capability
Budget constraints as a trigger for
further cooperation
 Horizon, F 124/LCF (Frigates Ge/NL),
FREMM, PA2/CVF
Stronger, better organised competitors
 New players, new products
 Fiercer competition
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NEW RESPONSE
Offer a comprehensive
response in terms of complete
warships or defence systems
COOPERATION
International cooperation can
offer better use of available
resources (R&D and
programme execution)
CONSOLIDATION
Consolidation is vital to
maintain our strategic
independence in Europe
A SHARED EUROPEAN VISION
 Objective:

Thales and DCN aim to promote the emergence of a world
leader in naval systems by combining their capabilities with
those of European partners who share the same vision.

That world leader will emerge progressively, according to a
timetable that suits the various partners.
 New milestone: combining the French naval assets
of DCN and Thales
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THALES/DCN – SUCCESSFUL COOPERATION
Joint PROGRAMMES
Sawari I & II
Horizon
Fremm
Joint COMPANIES
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
1990s: Horizon SAS, Eurosysnav, UDSI, SFCS

2002: creation of the joint venture Armaris, with responsibility for prime
contracting and sales for military products in export markets or on
cooperative programmes

2005: MOPA2 joint venture for France’s second aircraft carrier
DCN: A STRONGER PLAYER
WARSHIP
ENGINEERING
 Budgeted revenues: approx. €3 bn
MANAGEMENT OF
ASSEMBLY AND
INTEGRATION
YARDS
DESIGN AND
INTEGRATION OF
SYSTEMS AND
EQUIPMENT
SERVICES FOR
WARSHIPS AND
SHORE FACILITIES
 Order book:
approx. €8 bn
TNF
Armaris
MOPA2
+ Eurotorp
partnership
 Employees: approx. 13,300*
 Shareholders:

French State: majority shareholder with
75%
 Thales, industry stakeholder with 25%
* : direct employment
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DCN CAPITAL OPENED TO THALES
SHAREHOLDERS
STATE
THALES
75%
25%
Thales to finance its 25% interest
in DCN
 by transferring assets:
 Thales Naval France
businesses excl. radars (prime
contracting, CS/CMS, services)
its 50% interest in Armaris
(incl. subsidiaries)
 its 35% interest in MOPA2
 its 24% interest in the
Eurotorp partnership
by paying an additional cash
contribution


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THALES AND DCN COMBINE THEIR STRENGTHS
The operation makes the combined company stronger:
On its domestic market





stronger positioning as naval systems provider
merging of combat systems activities in France
optimisation of investments
stronger service offering
reciprocal access to know-how
On export markets
 access to Thales’ international marketing and sales network
In Europe
 greater credibility and legitimacy for subsequent consolidation
operations
Internally
 Solid industrial partnership
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A FUTURE-ORIENTED PROJECT
AND INDUSTRY PROJECT THAT MAKES BOTH DCN AND
THALES STRONGER
 Strategic unity between two major industry players


Move European consolidation forward
Improve positioning in international markets
 Industrial and commercial cooperation agreement





Optimise bids and improve competitive performance
Develop unified offering in France
Benefit from complementary R&D
Simplify industrial and contractual aspects of major programmes
Promote adoption of DCN and Thales equipment provided it is
competitive
 A project aimed to build momentum for Europe-wide
consolidation in the naval sector
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OPERATIONS
Long-term future of French facilities
Cherbourg
Paris region
Engineering and submarines
Paris region
Paris
Brest
Headquarters
Engineering
Brest
Thales Naval France
Bagneux – Engineering and
Services
systems
Lorient
Engineering and
surface ships
UDSI - Sophia
Nantes-Indret
St Tropez
Propulsion
Undersea warfare
Angoulême - Ruelle
Naval equipment
Toulon-Le Mourillon
Toulon
CMS, engineering
Services
EUROSYSNAV + UDSI + SFCS
Toulon – Combat systems prime
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HUMAN RESOURCES
 A future-oriented project with a place for
everyone
 HR practices are already similar and will be
progressively harmonised
 Continuation of individual work contracts
 Collective agreements maintained during
transition
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CUSTOMER CONTINUITY
Ongoing programmes
 Continuation within DCN of contracts awarded to
partners (Thales Naval France, Armaris or MOPA2)
Outlook
 Major programmes for French Navy (FREMM, PA2,
Barracuda: €10 bn in new orders over the next 10 years)
 Export opportunities represent 30% of revenues
Customer benefits
 Complementary areas of expertise and know-how
 Purchasing policy open to competitors
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GOOD VISIBILITY ON WORKLOAD
Ongoing programmes
Future programmes
France







FREMM
Horizon frigates
SSBN Le Terrible
BPC Mistral and Tonnerre
Overhaul of SSBN Le Téméraire
SSN and BS CLS
Comprehensive contracts for regular
maintenance on submarines with
availability guarantees
Export






Agosta Pakistan
Scorpène Chile
Scorpène Malaysia
Scorpène India
Formidable frigates for Singapore
Combat system for SAN PC corvettes
for South Africa
 Skjold patrol boats for Norwegian Navy
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France
 Barracuda SSNs
 Future heavy torpedo
 Overhaul of CDG aircraft carrier
Cooperative programmes
 PA2/CVF
Numerous export programmes
BENEFITS OF CONVERGENCE
 Fully integrated prime contracting for navies throughout
the world
 Major ongoing naval programmes
 Promising European and world markets
 Major player in the future European naval industry
 Respect for individuals and corporate cultures
A dynamic of value creation
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TIMELINE
PROJECT
LAUNCH
Approval by Boards
of Administration
AGREEMENT
FINALISATION
 Due diligence
 Shareholders’
agreement
 Cooperation
agreement
CLOSING
- Integration of
companies
- Opening of DCN
capital
Information / consultation with employee representative bodies
December 2005
3 to 6 months
Continued discussions with European partners
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Mid-2006
Ultimately…
construction of a
European
company
EUROPEAN VISION
 OBJECTIVE: EUROPEAN NAVAL INDUSTRY
CONSOLIDATION
 “DCN must take part in the consolidation of the
European naval industry.”
 “Thales’ role in the capital structure of DCN will
help to prepare the future industrial and
technological capabilities of the European
defence sector.”
Michèle Alliot-Marie
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APPENDICES
Companies
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DCN in brief

The DCN group is Europe’s leading prime contractor for complete
warships. The company provides client navies with a broad range of
value-added products and services.

DCN is conducting almost all the new construction and through-life
support programmes for the French Navy. Rounding out the company’s
workload, export contracts account for approximately one-third of
revenues. Other DCN businesses include naval equipment, propulsion
systems, combat management systems (CMS) and undersea warfare
systems.

DCN’s four core areas of expertise are as follows: warship
engineering; management of ship assembly and integration yards;
development and integration of propulsion systems, combat systems
and naval equipment; and through-life support and associated services.

The company has a workforce of 12,700* and generates average annual
revenues of some €2.6 bn.
* direct employment
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OPENING OF DCN CAPITAL
LAW OF 30 DECEMBER 2004
 An amendment to the 2001 Finance Law was needed to
enable DCN to open its capital to a minority shareholder,
or to set up subsidiaries by contributing industrial assets
or staff.
 The law of 30 December 2004 authorises:

Minority ownership of DCN capital
 Creation of subsidiaries to which DCN, as majority shareholder, may
contribute industrial assets and transfer staff
 The law stipulates conditions for setting up these
subsidiaries.
 It guarantees the long-term status of staff transferred to
these subsidiaries.
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THALES in brief
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
The Thales Group has a strong presence in the naval market; its naval
businesses have traditionally focused on the supply and integration of
equipment and systems - radars, optronic equipment, weapon
systems, etc. The Group also acts as prime contractor on several naval
programmes in France and export markets, and intends to expand its
involvement in this area.

Thales enjoys an excellent positioning in the world market, particularly
through its equity interests and subsidiaries in the Netherlands and the
United Kingdom, but also in Australia, Germany, Korea and South
Africa. Major Thales operations in the United Kingdom have made the
Group a valued partner of the Royal Navy, as is illustrated by its
selection for part of the CVF programme to build two new aircraft
carriers.

The Group’s naval businesses employ 6,000 people and generate
revenues of €2 bn.
Armaris in brief
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
The Armaris group was set up in August 2002.

Today, Armaris is prime contractor on the submarine programmes for
India and Malaysia, the Skjold patrol boat programme in Norway (with
partners KDA and UMOE), the Franco-Italian Horizon frigate programme
and the Franco-Italian multi-mission frigate programme with Italian
partner Orizzonte Sistemi Navali.

A joint subsidiary of Thales and DCN, Armaris has responsibility for
warship and naval systems sales and overall prime contracting in
export markets and on international cooperative programmes in which
France is participating.

Armaris employs 200 people and generates revenues of €460 m.