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Italy has thrown a spanner in the works of French jet engine maker Safran’s planned $1.8bn acquisition of the flight controls business of Collins Aerospace over concerns the deal could affect key supply contracts for the Eurofighter programme.
Safran said in a statement on Monday it had been informed that the Italian government had exercised its “golden power” to oppose its acquisition of Microtecnica, Collins Aerospace’s Italian subsidiary. Collins is a subsidiary of US-based Raytheon Technologies, now known as RTX.
According to the decree issued by Italy, which has been seen by the Financial Times, a government investigation “does not allow to conclusively conclude” that Safran would “give the necessary priority to the industrial production lines of interest for national defence”.
Italy also consulted with Germany ahead of the decision, according to the decree. The German government expressed concern that the deal could lead to the interruption of spare parts and services deliveries to the Eurofighter and Tornado jet fighter programmes, which were needed “to guarantee the operational requirements of Nato”.
As a result, Italy concluded that the deal “poses an exceptional threat to the essential interests of national defence and security”.
The move by Giorgia Meloni’s rightwing government underlines the challenges faced by European defence companies as they seek to bulk up through acquisitions. Given the national interests involved, governments often have more sway to intervene than in other sectors.
Safran chief executive Olivier Andriès told the Financial Times in an interview that the group was surprised by the decision and it had not held discussions with the Italian or German governments. He also hit back against the implication that Safran would not be a reliable supplier.
“They assume the worst about our intentions that we will not fairly support or prioritise the Eurofighter,” he said. “This is somewhat ironic since we are already suppliers of the Eurofighter and of other Italian defence programmes via various subsidiaries.”
Safran is now reviewing its options, but it said it remained committed to the acquisition announced in July, which would have been its largest since 2018.
The Microtecnica subsidiary accounts for about 15 per cent of revenues at Collins’s flight controls business, and there are three factories in Italy.
An Italian government official said Rome “deemed it necessary to avoid risks, even potential ones, of a negative impact on the readiness of its armed forces”. The official expressed concern about “potential slowdowns or interruptions of the supply chain” from the deal.
Italy adopted its golden power rules for foreign mergers and acquisitions of Italian companies deemed of strategic national interest in 2012. It has since expanded the number of sectors to which they can be applied.
Until now, these powers have mainly been used to block Chinese companies from acquiring Italian industrial assets, with former prime minister Mario Draghi blocking the Chinese acquisition of a chipmaker and Meloni’s government limiting the shareholder rights of Chinese petrochemical giant Sinochem over Italian tyremaker Pirelli.
Experts tracking such cases said Rome’s blocking of an acquisition from a European or Nato ally was relatively rare. Italy could have imposed conditions on the transaction — which had stoked fears about the closure of local production lines — rather than block the deal outright, but the Italian official said such prescriptions were not “adequate to protect the public interest” given the difficulty of ensuring compliance.
The Italian official said Rome would have “no shortage of opportunities . . . to explain to its allies the reasons for this measure”.
Andriès expressed dismay that Italy seemed to have no issue when Microtecnica was owned by a US shareholder, yet opposed the involvement of a French company.
“This is a very bad signal sent by Italy and Germany for the future of European defence collaboration,” he said.
