(Bloomberg) -- Italy’s Fincantieri SpA is open to forging deeper ties with Thyssenkrupp AG’s marine systems unit as the German conglomerate weighs options for its shipbuilding business.
“We know each other very well,” Fincantieri Chief Executive Officer Pierroberto Folgiero said in a Bloomberg TV interview, citing the companies’ 25-year collaboration on submarine systems. Asked whether he was interested in bidding for the Thyssenkrupp division, Folgiero said the Italian company was “at their disposal on any possible forms” to enhance cooperation.
Thyssenkrupp has been working to spin off or sell the marine systems unit as part of a larger restructuring plan. Talks on a sale of the business to Carlyle Group Inc. broke down earlier this month, when the private equity firm dropped out of the running. It’s now up to German institutions to decide on the best strategy to strengthen Thyssenkrupp after Fincantieri previously showed interest, Folgiero said.
The CEO has been a strong advocate of European defense firms working more closely together, whether through consolidation, joint ventures or platform-sharing. In May, state-controlled Fincantieri agreed to pay as much as €415 million ($449 million) for Leonardo SpA’s submarine armaments division. After raising about €400 million to fund it, the transaction is on track to be completed in early 2025, Folgiero said.
One way for European defense companies to work more efficiently, short of mergers and acquisitions, is through “defragmentation” of systems, or greater platform sharing, Folgiero said. The company’s Naviris joint venture with France’s Naval Group is doing this with frigates destined for each country’s navy, he said.
Defense Boom
As Europe’s largest shipbuilder, Fincantieri has benefited from a defense-spending boom driven by rising geopolitical tensions, from Russia’s invasion of Ukraine to conflict in the Middle East. While budgets are on the upswing, the company is also looking for ways to boost efficiency.
Fincantieri is on track to meet its financial outlook for 2024, including progress on deleveraging and cash generation, Folgiero separately told Bloomberg News. With the order backlog at record highs, the key is to convert more of that revenue into cash flow, he said.
“We gave some very ambitious targets and we are achieving gradually and on the financial targets, we are going faster than this,” Folgiero said.
Fincantieri shares have risen 13% this year, giving the company a market value of €1.6 billion. The company is set to report third-quarter results in mid-November.
--With assistance from Siddharth Philip.
(Adds TV interview clip.)
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