Talks Now Underway To Acquire 20.8 Percent Stake

Dassault Aviation, the French manufacturer of the Falcon line of business jets, has reportedly offered to expand its stake in the French avionics manufacturer Thales SA by acquiring a 20.8 percent interest owned by Alcatel-Lucent SA, the telephone equipment manufacturing firm.

Bloomberg reports Dassault's bid is 1.56 billion Euros, or about $2 billion US. That's a per-share price of 38 euros, or about the level at which Thales was trading a year ago. Its shares since have dropped 25 percent during 2008.

Thales is Europe's largest defense-electronics manufacturer, and builds the electronics for Dassault's Rafale fighter jets. The French government has an order for 294 of the jets, and analysts believe Dassault will step up efforts to market the jet to foreign buyers as a hedge against an expected slump in sales of its high-dollar civilian planes.

Dassault and Alcatel-Lucent say in their joint statement that talks will continue through December 15.

Alcatel could certainly use the cash. The company has lost 4.8-billion euros since 2006, and the stock has been trading under two euros per share.

If the deal is approved, Dassault would own about 26 percent the Thales, and could seek to expand its stake further. The French government also has a 27 percent stake in the avionics firm. In turn, 46 percent of Dassault is owned by Airbus parent EADS, the European Aeronautic Defense and Space Company.

FMI: www.dassault-aviation.com, www.thalesgroup.com