Thales expands in fast-growing sea drone warfare market with Exail deal

By Hugo Lhomedet, Jakob Van Calster and Florence Loeve

July 6 (Reuters) - Europe's largest defence technology group Thales said on Monday it had struck a deal to take a controlling stake in drone technology company Exail as it seeks a greater share of the fast-growing underwater drone warfare market.

Thales' offer exceeded one that Safran had proposed before ending takeover discussions with Exail on Friday, and gives Exail an enterprise value of €3.9 billion ($4.45 billion).

Thales said in a statement that it had agreed to buy the Gorgé family's 35.51% stake in Exail for €134 per share and planned to subsequently launch a bid for the remaining shares with a view of taking full ownership of the company.

The offer represents a 9.4% premium to Exail's share price as of Friday's close and exceeds the €128.5 per share that Safran had proposed.

BOOMING DRONE MARKET

Thales and Exail told a press conference they see the anti-submarine warfare addressable market increasing almost tenfold to over €700 billion in 2030, from €85 billion euros in 2025.

"The market we're targeting isn't that of mine warfare, it's more generally that of robotic underwater operations," Thales CEO Patrice Caine told the conference.

Exail shares rose 3.3% in early trading on Monday to €126.5, while Thales' shares were up 1.1%.

Other major European defence companies are also bolstering their drone offerings as conflicts in Ukraine and the Middle East have shown the advantage of deploying swarms of low-cost drones.

Germany's Rheinmetall for example, has signed a number of agreements to strengthen its drone offerings, even as its shares have fallen around 28% this year, partly as investor enthusiasm for traditional weapons makers is cooling.

By contrast, shares in drone makers such as Exail and Exosens have surged, as investors bet they will benefit from changing military requirements. Exail's shares were also boosted earlier this year by concerns that Iran could mine the Strait of Hormuz.

SOUND INDUSTRIAL RATIONALE

Thales said in its statement that by 2032, the deal should generate more than €90 million of adjusted earnings before interest and taxation and savings at run rate.

It added it expected the main synergies to come from joint R&D and the combination of the companies' commercial and production platforms, estimating commercial synergies could yield €500m in additional revenue within 10 years.

Julien Thomas at TP ICAP Midcap said that Thales was the only "natural potential buyer for Exail" as the industrial rationale for a takeover by Thales was far clearer than for Safran.

He said the French government, which owns 26% of Thales, must have encouraged the deal and he didn't expect any antitrust issues.

Thales said the deal is expected to complete in the third quarter of 2027 after customary antitrust and regulatory approvals.

RESOLUTION WITH DEBTOR

Shares in Exail tumbled 16% in early June after the company disclosed a disagreement with its creditor ICG over the valuation of Exail Holding, the unlisted subsidiary through which ICG holds bonds and preferred shares, with the two sides about €380 million apart.

During Monday's press conference, Caine affirmed the deal meant minority shareholders in the subsidiary would be bought out at the same price as the takeover bid.

"From the moment an acquisition price is set, the rest is kind of mechanical," the Thales chief executive said.

Exail CEO Raphael Gorgé said discussions have remained "constructive" and noted ICG's continued support.

($1 = 0.8759 euros)

(Reporting by Jakob Van Calster and Hugo Lhomedet in Gdansk, Florence Loeve in Paris Editing by Shri Navaratnam, Louise Heavens and Susan Fenton)