May 27, 2019 / 1:07 PM / a year ago

Leonardo could seek tie-ups in specific business areas: CEO

MILAN (Reuters) - Italian aerospace and defense company Leonardo could seek partnerships in specific business areas, CEO Alessandro Profumo said, ruling out a merger involving the entire group.

FILE PHOTO: Leonardo's CEO Alessandro Profumo is seen on a screen at the headquarters in Vergiate, near Milan, Italy, January 30, 2018. REUTERS/Massimo Pinca

Speaking to a foreign media event, Profumo said he expected Europe’s fragmented defense industry to consolidate, with tie-ups emerging in specific business areas as companies embark on joint projects and strive to cut costs.

“As a parent company, Leonardo isn’t planning to join a potential M&A trend in the defense industry but I think there is room for M&A in Europe at business area level,” Profumo said on Monday.

“We want to remain in the driving seat and lead the M&A process in those business areas where Leonardo is a leader, on the opposite side, in those areas where the group is not a leader it is open to cede control in a combination,” he said.

The group is currently working on a potential alliance in torpedoes. Apart from this and a preliminary bid for the maintenance business of Italian aviation technology company Piaggio Aerospace, there is no concrete deal on the table at the moment, Profumo said.

Leonardo has three main business areas: helicopters, aircraft and electronics & defense. In addition, the group operates other businesses that could eventually be streamlined and sold to make its portfolio more rational, the CEO said.

Since taking the helm in May 2017, Profumo has managed to turn around the core helicopter division, which last year contributed to a 5% rise in group revenue to 12.4 billion euros.

Profumo is also working on relaunching the aerostructures division - which makes carbon fiber structures for Boeing and builds fuselage sections for Airbus, Boeing and Dassault.

After a management change at this division, some positive signs are starting to show, he said.

On the group’s newly created cyber security business, Profumo said he wanted to boost investment but declined to comment on possible M&A plans.

Leonardo has made a non-binding bid for Piaggio Aerospace’s maintenance business and Profumo said there were no plans to buy the entire company. The Italian government has said it does not want the company to be split up.

“I am not jealous about Piaggio Aerospace, if there is an investor ready to buy the whole company, it is fine for me.”

Profumo urged a cautious approach toward China when asked about the U.S. decision to place Huawei on a trade black list, effectively banning U.S. firms from doing business with the world’s largest telecom network gear maker.

“Western countries need to respect Chinese as interlocutors but we also need to make their lives more difficult,” he said.

Editing by Jane Merriman

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