Possible Thales, Leonardo role in Franco-Italian ship talks

ROME/PARIS (Reuters) – Italy and France are discussing a ship-building alliance that could lead to partnerships with Europe's second and third biggest defense contractors, Thales and Leonardo, two sources close to the matter said.

The idea has emerged as Paris and Rome try to resolve a dispute over a shipyard in Western France which the French government nationalized to block an attempted takeover by Italy’s Fincantieri.

France was concerned about job losses at the STX shipyard, the only French site big enough to build aircraft carriers and other large warships.

The two governments hope to resolve the STX shipyard dispute in time for a Sept. 27 summit in Lyon where French President Emmanuel Macron and Italian Prime Minister Paolo Gentiloni hope to smooth tensions created by growing French influence over Italian businesses.

"Progress has been made towards the possibility of a European civil and military shipbuilding enterprise," an Italian official with access to the bilateral talks told Reuters.

"It's clear that Leonardo, along with Thales, cannot be ignored, even if it is difficult to say now how they will be involved."

A French official familiar with the discussions said Thales and Leonardo could be brought in as partners for Fincantieri and Naval Group, another French shipbuilder and a small shareholder in STX. Thales owns 35 percent of Naval Group.

The official, speaking on condition of anonymity, said Thales and Leonardo could become shareholders in a wider equity alliance or merely suppliers, but that there was no Thales-Leonardo deal for now.

Thales and Leonardo declined to comment.

A spokesman for Naval Group said, "Naval group has always made clear its desire for an industrial alliance at the European level. Continuing discussions with Fincantieri would allow us to intensify the fruitful cooperation we have and, in time, create a global leader."

He declined to comment on the possibility of widening the alliance to Leonardo and Thales.

An Italian government source said the two nations may work over the next 12 months to study valuations and flesh out ideas on the military part of the proposal.

Defence Minister Roberta Pinotti is "worried about possible knock-on effects for Italians defence companies, among which Leonardo is the main one," the source added.