Swiss Firm Aligns Self for Role in Civil and Military Space

PARIS — The Swiss defense and aerospace company Ruag intends to use its acquisition of Saab Space and Saab-owned Austrian Aerospace as a force multiplier at the European Space Agency (ESA) as , collaborate on investment choices, Ruag and Saab officials said.

Space is currently a minor business portfolio for Ruag of Bern, Switzerland. Yet, despite the generally flat government space spending in , company officials said they intend to make the civil and military space markets a strategic company priority by 2010.

, in contrast, decided in late 2007 that its space division provided few synergies or other advantages with Saab’s other business divisions and should be sold.

“The difference between Saab and Ruag is that Saab concentrates on the construction of aircraft. Ruag is a supplier and integrator of systems and components for military and civilian aerospace applications,” Ruag Executive Vice President Peter Scherrer said in a July 16 e-mail response toSpace News questions. “With our strategy 2010, we defined space as a strategic priority. The acquisition of Saab Space fits into our strategy.” Scherrer will oversee the integration of Saab Space and Ruag.

In a July 15 announcement, Ruag and Saab said Ruag had agreed to purchase Saab Space for the equivalent of less than six months of Saab Space’s 2007 sales. The agreement includes a price escalator depending on Saab Space’s future performance.

The agreement, which must clear European regulatory approval, puts an end to a seven- month search by for a buyer of its space division. Saab had entered into advanced negotiations with space-hardware prime contractor ThalesAlenia Space of and , but these negotiations ended in May when the two sides could not agree to a price, industry officials said.

Under the agreement now concluded, Ruag will pay Saab AB 335 million Swedish krona ($56.3 million) for Saab Space, which in 2007 reported sales of 724 million krona, or $113.1 million at end-of-2007 exchange rates.

“At Saab we put up two conditions to carry through a sale: to find a professional buyer with the ambition to further develop the [Saab Space] operations and to get a fair price,” Saab AB Chief Executive AkeSvensson said in a July 15 statement. “With Ruag we have been able to reach an agreement that fulfills both conditions. The price is acceptable and Ruag is a company that in our view has the capability of further developing the operations of Saab Space and Austrian Aerospace.”

One industry official said Saab Space had been valued at about 450 million krona, which when its current debt was subtracted resulted in the 335-million-krona sales price. Saab said that under the agreement, Ruag will pay Saab “an additional consideration related to the long-term positive performance of Saab Space.”

Scherrer declined to comment on the price escalator clause or how Saab Space’s debt was accounted for.

Saab Space Chief Executive BengtMortberg said in a July 16 interview that the company expects 2008 revenue to be slightly superior to 2007 despite the decline of the U.S. dollar compared to most European currencies. Saab Space said that in 2007, U.S.-based customers accounted for 9 percent of total sales. Saab Space specializes in computer and microwave electronics systems for satellites and other orbital infrastructure, and on satellite- separation systems used by rocket suppliers to release satellites in orbit.

Mortberg and Scherrer said Ruag has no plans to make substantial changes to Saab Space’s work force of 500 employees. “Most product areas are complementary and will be combined to enlarge and improve our products and services portfolio. There is little redundancy,” Scherrer said, adding: “The [Saab Space] operations depend on assets that are not easily moved without major investments.”

Saab reiterated previous statements that Saab Space is well-managed and profitable, but that its business enables the parent company to realize few synergies with other Saab operations. “It was considered a good time to act since a consolidation process in the European space industry is ongoing,” Saab’s Svensson said in his statement.

Mortberg said ‘s space sector is consolidating, especially in those nations whose space budgets are not, by themselves, sufficient to ensure the growth of a space industrial base. A Ruag-owned Saab Space will be able to take advantage, at least in some ESA contracts, of the combined weight of the ESA contributions made by , and now

ESA contracts are distributed mainly on the basis of how much each nation contributes to a given program.

To maximize the benefits of the purchase, Ruag will need to persuade the three governments to coordinate their ESA investment.

The Swedish National Space Board (SNSB), which manages ‘s space budget and its ESA contribution, endorsed the Ruag purchase of ‘s biggest space-hardware company. “I am looking forward to an interesting and close cooperation with the new owners,” SNSB Chairman PerTegner said in a July 15 statement. “This will bring , closer in the European industrial cooperation, which I am convinced will benefit both the involved companies as well as the countries.”

Ruag’s approximately 150 space-hardware employees will be merged into Saab Space. Ruag’s space business currently is focused on composite carbon- or glass-fiber structures; control momentum gyros and solar array drive mechanisms for satellites; and the manufacture of instruments for low- gravity experiments.