SAFRAN divests mobile phone unit

SAFRAN has signed a formal agreement with Sofinnova, providing for the divestment of its mobile phone business under optimum social and financial conditions. Sofinnova, a French venture capital firm specialized in high technology, was created in 1972 and is the European leader in this sector. The agreement is subject to the approval of employee representative bodies.

Sagem Mobiles will continue to conduct its business until this transaction is completed, which should be by the end of 2008 at the latest.

Drawing on the franchise, brand and technologies contributed by SAFRAN, Sofinnova will create a new mobile phone ODM (Original Design Manufacturer) company. It will develop and market products under other brand names, and on behalf of operators or other manufacturers, as well as for fashion, sports and luxury companies.

The new company will be named Sagem Wireless, and will be based in Cergy-Pontoise, near Paris. Sofinnova will hold a majority stake, while SAFRAN will retain approximately 10%.

Pasquale Pistorio, a well-known leader in the high-tech business sector, has accepted the position of Chairman of the Board.

The new company will have about 310 employees (70 at Cergy-Pontoise and 240 at Ningbo, China), and will call on Esmertec and Purple Labs for the development of its software platforms. Sofinnova is a shareholder in these two companies, which are leaders in their telecommunications software markets. About 250 staff members from Sagem Mobiles’ R&D department will transfer to these two companies, and will stay at Cergy-Pontoise.

The new company will also subcontract mobile phone personalization and packaging operations to the SAFRAN plant in Fougères.

For Sagem Mobiles employees not covered by these transfers, SAFRAN will offer priority redeployment within the Group, primarily in the security and onboard electronics sectors, which are currently enjoying strong growth and require similar qualifications.

The SAFRAN Group has already set up new operations at its Fougères site, including integration of the FELIN soldier modernization system and production of PC boards. It will continue to diversify its site by transferring complementary operations in related fields.

The total cost of these changes is approximately 220 million euros. In addition to the operating loss posted by this business for 2008, this amount mainly includes support and adaptation measures applied at the entities and sites concerned, as well as various charges and asset depreciation.

“Several months ago, I pledged to find a solution for our mobile phone business; today, I have fulfilled this pledge,” said Jean-Paul Herteman, CEO of SAFRAN. “I am convinced that this will be a successful solution, because the ODM business model clearly addresses specific needs, while at the same time we will reduce our fixed costs by integrating the R&D teams from Sagem Mobiles and companies in the Sofinnova portfolio. SAFRAN will of course make sure that we provide satisfactory solutions to each and every person who is not involved in the activities of the new organization: not only is this our duty as a good corporate citizen, but also because these persons will provide invaluable reinforcements for the development of SAFRAN is other sectors.”

“Europe is both the birthplace and the main center of innovation for mobile telephony,” said Jean Schmitt, Managing Partner of Sofinnova. “For nearly a decade now, we have invested in the emerging global leaders in this market. With this latest transaction, we can bolster the software companies that are leaders in this market, and also create a large-scale software R&D center at Cergy. Above all, this transaction creates Sagem Wireless, which has the world-class people and technologies needed to become a global leader.”

“Sagem Wireless will combine the expertise of the people from Sagem Mobiles, and the dynamic innovation mindset contributed by companies in the Sofinnova portfolio to offer products with a distinctive difference, tailored to the specific requirements of our partner-clients,” added Thierry Buffenoir, Chairman and CEO of Sagem Mobiles. “Our broad European presence, technological strengths and forward-looking strategy should undoubtedly enable us to win over today’s leading brands by offering unrivaled products. Sagem Wireless clearly enjoys a very promising growth outlook in its chosen market.”

Source: Safran groupe press release