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Airbus, Thales, Leonardo to pool satellite activities

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New venture to employ 25,000, generate 6.5 bln euros in

revenue

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Airbus initially to hold 35%, Thales and Leonardo 32.5%

each

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Preliminary faces regulatory approval process

(Adds French minister, Thales CFO, details, shares)

By Giulia Segreti and Tim Hepher

ROME/PARIS, Oct 23 (Reuters) -

Europe's largest space groups unveiled a preliminary deal on

Thursday to join forces in satellite manufacturing and services

after months of negotiations to counter the runaway growth of

rivals led by Elon Musk's Starlink.

The deal between Airbus, Thales and

Leonardo will forge a new France-based venture

starting from 2027 in the most ambitious tie-up of European

aerospace assets since MBDA missiles maker in 2001.

French Finance Minister Roland Lescure said the deal

would "strengthen European sovereignty in a context of intense

global competition".

NEW SPACE VENTURE FACES GLOBAL COMPETITION

The new combination will employ 25,000 people with

revenues of 6.5 billion euros ($7.58 billion), based on 2024

figures.

It is expected to generate "mid-triple digit" millions

of euros of synergies starting after five years, the companies

said, without detailing how these would be achieved.

Shareholders now face up to two years of talks with

governments, unions and the European Commission over the deal,

which has implications for activities in Britain and Germany as

well as Italy and France, where the venture will be based.

The companies, who have already cut a combined 3,000

jobs in their space businesses, made no mention of further cuts,

but executives said the focus would now turn towards potential

growth.

Code-named "Project Bromo," talks between the three

aerospace groups started last year in a bid to copy the

co-operation model of European missile maker MBDA, which is

owned by Airbus, Leonardo and BAE Systems.

Europe's top satellite makers have long competed to

build complex spacecraft in geostationary orbit but have been

hit by the arrival of cheap tiny satellites in low Earth orbit,

notably the proliferating Starlink network built by Musk's

SpaceX.

Shares in Thales and Leonardo rose more than 2% while

Airbus was fractionally higher in early trading.

"The initiative is certainly positive, as it creates a

European leader capable of competing globally and improves the

profitability of a business ... that has struggled in recent

years," Italian investment bank Equita said in a note.

BALANCING PAYMENTS

Airbus will hold 35%, while Thales and Leonardo will

each hold 32.5%, the companies said, adding the new firm would

come under joint control "with a balanced governance structure".

Sources familiar with the deal have said those stakes

will be adjusted to a third each through balancing payments

between shareholders, with Airbus receiving compensation for

lowering its initial stake when the deal closes in 2027.

The deal will combine activities of Thales Alenia Space

and Telespazio - two joint ventures between Leonardo and Thales

- as well as various Airbus space and digital businesses, the

remaining space activities owned by Leonardo and Thales SESO.

Thales CFO Pascal Bouchiat, announcing quarterly sales

that included an initial contract for a new European satellite

network, hailed the new venture but sounded a cautious note

about the scale of competition ahead.

"Telecoms activity in space remains under pressure,

that's clear. The fact that we had this first development

contract for IRIS² doesn't take away the challenges that the

European industry, in particular, is facing," he told reporters.

Reuters reported earlier this week that the groups had

reached a framework deal on the tie-up.

Agreement between the three companies - each of which has

had periods of prickly relations in the past - was salvaged

after sources familiar with the matter said the talks had hit

obstacles over governance and valuation during the summer.

The trio gave few details of governance but executives

pledged to avoid a system of rotating leadership or making

appointments based on nationalities which has roiled parts of

the European aerospace industry, especially Airbus, in the past.

($1 = 0.8575 euros)