French sovereignty in question

The American aerospace and electronics company Heico is in the process of buying Exxelia, the French ETI which produces electronic components, partly for the military sector. A sensitive operation that worries the government, reluctant to deliver national strategic interests to a foreign group.

This is news that revives the debate on the protection of French flagships. Exfolia, the French company that champions complex passive components (capacitors, magnets, resistors, filters, position sensors, high-precision mechanical parts) essential for all electronic equipment, could be taken over by Heico, the American group specializing in aerospace and electronics.

Exxelia achieved a turnover of 160 million euros last year and employs 2,000 people. The group has 12 sites worldwide, including two in the United States and six in France. At Pessac, Exxelia produces capacitors to ensure the quality of the electrical signal. Its components are located in the medical world, transport, aeronautics (Airbus A350 and A320, Boeing 787) or energy. They are also present on Ariane 5 and soon Ariane 6, the Rafale aircraft and the Barracuda submarines.

An XXL performance for a company born in 2009 following a merger of five companies. This is the reason why Heico intends to put 453 million euros on the table to take control of this French industrial nugget, according to Capital Finance. Exxelia’s management will retain 5% of the capital.

The idea of ​​selling a national company, operating in the military sector, to an American group is however seen less and less favorably by the French population. “Has the government looked at whether this company had a strategic interest? Knowing that, if this is the case, the Montebourg decree makes it possible to oppose the sale of a French company to a foreign group”, asks Senator (CRCE) Marie-Noëlle Lienemann.

Faced with the mobilization of various political and economic players, Defense Minister Sébastien Lecornu personally wanted to answer a question from Calvados Senator Pascal Allizard during his hearing in the Senate on Tuesday, October 11: “with a single word, they do things that interest us very directly in sovereignty beyond the industrial interest”.

The takeover of Exxelia is reminiscent of the Photonis affair. This set a precedent by showing that the government had the means, if it so wished, to impose sovereign approaches by renouncing foreign investment to protect a strategic asset, and that these approaches could also be economically relevant. In 2020, this French flagship of optronics, which notably manufactures night sights for special forces, was coveted by the American giant Teledyne. A project against which the French parliamentarians had strongly opposed, denouncing a risk for the sovereignty of the country.

This outcry pushed the government to find a European solution. A solution to the end of the crisis had satisfied the various stakeholders, when HLD, the investment fund founded by Jean-Bernard Lafonta, made an offer for Photonis in 2021. “Our objective is to double, or even triple, the turnover of Photonis in the next five to ten years, by developing it in particular in the infrared”, indicated Jean-Bernard Lafonta at the time. The HLD fund, known in particular for the sale of the French laboratory Filorga to Colgate-Palmolive for 1.5 billion euros or the development of Kiloutou in Europe, had shown its ability to invest in defense by buying a few years earlier 60% of Rafaut, an essential supplier of the Rafale, then bringing it closer to Alkan, thus creating a European leader.

With the support of HLD, Photonis was able to remain French and even strengthened its leadership position while accelerating its growth. The company now generates 165 million euros in turnover, and has 1,000 employees spread over 10 industrial sites in France, the Netherlands, Mexico and the United States.

A few weeks after HLD’s intervention, we learned that the American group Teledyne had sought to acquire Photonis and another company, Flir Systems, to constitute a dominant player in the field of optronics (infrared and light intensification) which would have significantly weakened Lynred, the 50% subsidiary of Safran and Thales, world number two in infrared vision. According The TribuneTeledyne allegedly failed at the time to inform the French government of the existence of this plan and of the plans to acquire Flir Systems.

Owner of Exxelia since 2014, the British company IK Partners had entered into exclusive negotiations with the HLD fund in 2020. The latter had finally made the choice to take over Photonis the following year.

Exxelia mass-produces electronic components for sensitive sectors, and “While the manufacture of these components, produced in large volumes, has gone abroad, the company has retained control of the entire process in Pessac, from the material to the production of the components”, specifies the Regional Council of New Aquitaine.

The Heico project, which should materialize in early 2023, therefore raises questions. Seeing a risk for the sovereignty of the country, Marie-Noëlle Lienemann has just tabled a bill on the creation of a national economic intelligence program.

“Exxelia produces elements for Ariane or the Rafale. I consider it strategic. Knowing that the American law allows to prohibit the sale of certain products to countries, what would happen if the relations with the United States deteriorated? Furthermore, we also know that the orientation of R&D is not neutral and could be based on American rather than French or European projects”, concludes the senator.

At a time when war is raging on our doorstep, or certain countries like Germany seem unwilling to play as a team with France, is it really reasonable to let other states, even allies, do their shopping in the tricolor BITD (Industrial and Technological Base of Defense)?

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