OHB Exec Says Four Ariane 5 Flights per Year Will Justify MAN Technologie Buy

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OHB System’s purchase of MAN Technologie, a move that will recast OHB’s business mix by adding a heavy component of rocket-hardware construction, will more than double the company’s work force and will meet its objectives even if only four Ariane 5 rockets are launched per year in the coming years, OHB officials said.

The purchase was made for an undisclosed price that OHB officials said makes sense even if the Ariane 5 rocket market remains mediocre for an extended period.

“We can live with a market of just four Ariane 5 launches per year,” said OHB Managing Director Marco Fuchs. “Anything less than that and it would be difficult, and with five per year we are in good shape.”

The sale of Augsburg, Germany-based MAN Technologie was concluded after a long search for a buyer by its corporate parent, MAN Group. In the past three years, MAN Technologie, which makes components for Ariane 5 solid-fueled boosters, has cut its staff by more than one-third. MAN Group took successive losses on the business and also wrote off much of its equity investment in the Arianespace commercial-launch consortium, in which MAN has a 7.5 percent ownership stake.

Fuchs said the costs associated with the staff reduction and with the Arianespace-related writedown give a distorted picture of MAN Technologie, to be renamed MT Aerospace.

“The picture for MT Aerospace looks blacker than it is,” Fuchs said. “What we purchased, with Apollo Capital Partners GmbH, is a company with a lot of cash, more than 300 million euros ($363 million) in orders and very little risk to its business going forward. We will wait a year to see how things go before determining whether to consolidate MT Aerospace on our accounts. Until then the downside risk to us is minimal.”

MT Aerospace is expected to report a profit this year attributable mainly to one-time events. Its core business performance and its ability to contribute to OHB’s bottom line will not be fully tested until 2006, according to OHB.

MT Aerospace counts 580 employees and generated slightly more than 100 million euros in revenues in 2004. OHB has 300 employees at its Bremen, Germany, headquarters, and about 200 working for Carlo Gavazzi Space in Milan, Italy.

Manfred Fuchs, founder of the Fuchs Group, OHB’s parent company, said OHB has historically had a strong basis in space infrastructure, including hardware for the international space station. More recently OHB’s satellite-production division has grown, especially after the company won the German Defense Ministry contract to build the five-satellite SAR-Lupe radar reconnaissance system.

OHB also is an investor in the Orbcomm data-messaging satellite constellation and is under contract to Dulles, Va.-based Orbcomm for construction of a test satellite for second-generation services. OHB is using a satellite platform provided by the Polyot organization of Omsk, Russia, and a communications payload supplied by Orbcomm founder Orbital Sciences Corp. of Dulles.

“What we’ve done here with this purchase is to rebalance the company’s business,” Manfred Fuchs said.

Several European industry officials said privately they were skeptical that OHB’s purchase of MT Aerospace was concluded without German government guarantees. German government officials had said they wanted to keep the Ariane 5 booster business in Germany, with a preference for German ownership.

Manfred Fuchs said there were no deals made with the government as part of the purchase.

“I have always thought that to be successful in the space business you need to make a full commitment,” Manfred Fuchs said. “It is difficult to succeed if it is just a small part of a larger enterprise that does not understand the business. We think our company’s total commitment to the space business will give us an advantage.”