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 This information is provided by RNS The company news service from the London Stock Exchange

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