Leonardo to acquire a 25.1% stake in HENSOLDT for €606 million

Leonardo has entered into a definitive agreement with Square Lux Holding, a portfolio company controlled by funds advised by Kohlberg Kravis & Roberts, to purchase a 25.1 percent stake in HENSOLDT for cash consideration of about €606 million. HENSOLDT is a leading European player in the field of sensor solutions for defence and security applications, with an expanding portfolio in cyber security, data management and robotics. As a result of the stake purchase, Leonardo will become the largest shareholder of HENSOLDT alongside Kreditanstalt für Wiederaufbau (KfW) which is 80 percent owned by the Federal Republic of Germany. KfW agreed to acquire a 25.1 percent stake in HENSOLDT in March 2021. Alessandro Profumo, Leonardo CEO, said: “We are excited about the investment in HENSOLDT as the catalyst for the establishment of closer cooperation that will further enhance our respective positions in the growing defence electronics market. We believe that this step will create value for all our shareholders as it will bring together complementary strengths to serve more customers and partners with the solutions they need, while preserving national technologies and capabilities. This investment also reflects our long-held view on the importance of building cooperation across the European aerospace and defence industry and demonstrates the determination of Leonardo to play an active role in this development.” Thomas Müller, CEO of HENSOLDT, said: “We very much welcome LEONARDO’s investment in HENSOLDT. With this transaction, we will have a second long-term anchor shareholder in our company and a strong potential strategic partner with whom we are already successfully working together on a number of programs. As a leading provider of sensor solutions for defence and security applications, we see multiple opportunities of working together with LEONARDO to further support our successful strategy and to be able to strengthen HENSOLDT’s long-term growth.” With the investment in HENSOLDT Leonardo will establish a strategic long term presence in the fast growing German defence market. Already today, Leonardo and HENSOLDT have a well-established relationship, including collaboration on the Eurofighter Typhoon program as independent operators within the consortium model. The envisioned closer cooperation will be based on a strong complementarity of the two companies in terms of geography, product portfolio, end markets, customers and suppliers in the Air Land and Naval domains and will allow them to deepen access to their respective markets, offer complete solutions to their customers and share best practices for the development of future technologies. Upon closing of the transaction, Leonardo will propose two candidates to be nominated as members of the Supervisory Board of HENSOLDT. Leonardo will maintain a solid capital structure also through disposals and DRS listing. The closing of the transaction remains subject to customary conditions, including regulatory clearances in Germany and a selected number of countries, and is expected to take place in the second half of 2021. GEM elettronica stake purchase Leonardo has acquired a 30 percent stake of share capital in GEM elettronica, an Italian company specialising in the production of small and medium-sized 3D radars, electro-optical sensors and inertial systems for the maritime, air and land sectors. The move will strengthen Leonardo’s market position in the naval electronics field, particularly in short and medium-range sensors. Leonardo will be able to expand and diversify its offer and improve the engineering, production and marketing of products in different bands to those in Leonardo’s existing portfolio. GEM operates in complementary market niches to those of Leonardo, offering competitive systems such as navigation radar and coastal monitoring, electro-optical equipment and fiber-optic gyroscopes. GEM is also active in the maritime and border surveillance market. The company has the capacity to produce critical components for Leonardo products as well as specialised radar and electronics capabilities. As well as acquiring 30 percent of GEM, Leonardo has signed a commercial and industrial agreement with the company. This will see Leonardo and GEM developing synergies where GEM’s specific expertise aligns with Leonardo’s business, including joint marketing activities and joint research and development projects. Areas of collaboration will include the naval/maritime domain, critical infrastructure and applications for land platforms. GEM elettronica has around 130 employees and produces products almost entirely in-house. Active in civil and military markets, the company has a presence in Italy and internationally and has established collaborations with major market players inside and outside of Italy. GEM has acted as a supplier to Leonardo for many years on numerous projects, including collaborations on the FREMM programme and the Italian Navy’s fleet modernisation programme known as the “Naval Law”. Under the agreement, Leonardo will be able to increase its stake in GEM’s share capital and acquire control of the company via a purchase option which can be exercised in 2024. The partnership is aimed at strengthening capabilities to increase competitiveness in the long term, in line with Leonardo’s strategic plan “Be Tomorrow – Leonardo 2030”. 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