BAE SYSTEMS and FINMECCANICA

BAE SYSTEMS PLC
04 July 2003

4 July 2003

BAE SYSTEMS AND FINMECCANICA MOVE TO ESTABLISH A MAJOR EUROPEAN PARTNERSHIP

BAE SYSTEMS plc and Finmeccanica Spa have signed a Memorandum of Understanding
to establish a partnership, Eurosystems, bringing together their European
defence electronic systems activities. The partnership establishes a Strategic
Coordination Committee (SCC) and three majority controlled Joint Ventures, each
with clear operational control of its business.

The SCC, formed by senior managers of the shareholders, will facilitate the
co-operation and interaction of the joint ventures. The SCC will also ensure
that the JV strategies support the multi-domain nature of future defence
requirements and respond to the demand for highly integrated systems.

The three JVs will operate in the following areas:


  • A Systems Integration and C4ISR business, to be majority owned and managed
    by BAE SYSTEMS, with capabilities in C4ISR information systems and
    sub-systems, combat management systems, land & naval radars and air traffic
    control systems. The business will be formed from existing activities of AMS
    (a 50-50 JV of BAE Systems and Finmeccanica) and BAE SYSTEMS C4ISR (less
    communications)..

  • A Communications Systems business, to be majority owned and managed by
    Finmeccanica, with capabilities in strategic and tactical communication
    systems, networks and secure systems. The business will be formed from the
    existing activities of Marconi Selenia Communications and the communications
    activities of BAE SYSTEMS C4ISR.

  • An Avionics business, to be majority owned and managed by Finmeccanica,
    with capabilities in sensor systems, airborne radars, mission systems,
    electro-optics and electronic warfare systems. The business will be formed
    from activities within BAE SYSTEMS Avionics and Finmeccanica's Galileo
    Avionica.

Having established the principle of a structure and management framework that
delivers clear accountability and positions the businesses in line with the
needs of the market, the two companies will move into a detailed process of
valuation. The formation of the three joint ventures is subject to the parties
executing definitive agreements and obtaining all necessary regulatory
clearances. The arrangements announced today do not affect the interests of BAE
Systems and Finmeccanica in MBDA.



Richard Evans and Pierfrancesco Guarguaglini, the Chairmen of the respective
parent companies, said in a joint statement today:

'Our companies have shared objectives in a desire to improve their performance
in the market, establish businesses that address the trend towards integrated
systems and enhance their operational effectiveness. The MOU we have signed
today provides the framework to achieve these objectives. Much detailed work
remains to be done before the new companies are operational but we are confident
that we will create companies that will meet our customers' requirements and
provide opportunities for profitable growth.'

Ends

Issued by:

BAE SYSTEMS plc

London










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