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December 2017, the French aerospace company Thales and the digital security firm Gemalto (secure software, biometrics and encryption for businesses and governments to authenticate identities and protect data), jointly announced the agreement on a recommended all-cash offer for all issued and outstanding ordinary shares for Gemalto (€51 per share). The waiting period has been extended until 15th August 2018.

Thales will combine its digital businesses into Gemalto, which will continue to operate under its own brand as one of Thales’ seven global business units. By acquiring Gemalto, Thales adds around €3 billion of revenue for 2018 to its digital business sales and acquires a set of technologies and competencies which have applications across Thales’ five vertical markets (Aeronautics, Space, Ground transportation, Defence and Security).

The combination of the two signifies that the French-Dutch company Gemalto will return under the French flag as Thales takes its shares. The digital security firm is currently based in Amsterdam and run by top Chief Executive Officer Philippe Vallée (since 2016) and Non-executive Chairman Alex Mandl. The company was launched back in 2005, after a merger of Axalto and Gemplus. The governing principle between these digital firms is the current Gemalto’s NEC: Alex Mandl, as he was also CEO of Gemplus, In-Q-tel, and former CIA employee. As a reminder In-Q-tel is an American non-profit firm created to support American intelligence agencies such as the CIA, and funds amongst others Palantir Technologies (Data Analytics), Recorded Future (Predictive Analytics), and Interset (Security Analytics).  Therefore, he will continue to play a crucial part with the French CEO in the governance, direction, and intelligence of the company within the merger with Thales.

Gemalto’s unrivalled and innovative technology portfolio will put Thales in a highly differentiated position to provide not only to enterprises and government agencies but also implement gradually new security and technologies within its own different markets.

Thales’ interest in acquiring Gemalto reflects its recognition of several opportunities such as securing the American 3M’s Identity Management business which specialises in biometric technology, after losing the Safran Morpho deal to Oberthur Technologies (U.S. IDEMIA), and announced in 2017 new on-demand connectivity deals with consumer device makers like Microsoft, industrial players such as the PSA Group, and mobile operators like AT&T and Telefonica (see table below).

All in all, whilst Gemalto will appear under the French flag just like Morpho, it seems in reality to be highly influenced by American direction by reason of Alex Mandl, and its affiliation with its new U.S. subsidiary 3M.

From Thales’ point of view, acquiring Gemalto represents first and foremost an acceleration of its digital strategy: over the past three years, the aerospace company has significantly increased its focus on digital technologies, investing over €1 billion in connectivity, cybersecurity, data analytics and artificial intelligence, in particular with the acquisition of Guavus, Sysgo, and Vormetric.

In addition, further indications of Thales’ interest for digital security within the defence environment can be seen through its participation in the French “Matrice” program with the “Hackathon” project (“hacker” and “marathon”) which is now in its second year. Thales has partnered up with the French Navy and “l’Ecole 42” to create a 3-day competition for students to develop a collaborative sharing tool intended to feed a specific cloud for maritime users. This initiative represents the new direction the French Defence and Maritime industry is taking, notably with the Thales-Gemalto partnership leading the way.


Written by Alexandra Stafferton (Junior Analyst) for OIDA Strategic Intelligence


The Institute for Maritime Technology (IMT), a division of Armscor Defence Institutes, provides research-based technological development and systemic support to the South African Navy. Armscor is the acquisition agency for the South African Department of Defence however it has expanded its service offering to include the research and development of technologies that are marketed locally and internationally.

The IMT has evolved to provide services outside of the maritime domain to other South African National Defence Force (SANDF) structures. State-owned defence-related research institutions in South African at times collaborate and are involved in the transfer of technology from military to civilian applications. An example of this is IMT’s Ultrasonic Broken Rail Detector (UBRD), initially developed to detect cracks on submarines by utilizing sensor technology. The UBRD was developed by Armscor in close collaboration with Transnet and the Council for Scientific and Industrial Research (CSIR), who provided the transducer for the system. The UBRD detects breaks in railway tracks under any and harsh environmental conditions. The system is easy to install and maintain and does not require track modification, fitting of track bonds, or trenching. The system’s signal processing and diagnostic techniques ensure reliable operation and section coverage of up to 1000 meters.

The UBRD system operates with transmitters and receivers whereby an acoustic signal is generated and inserted in the rail at one location (transmitter), broadcasted along the rail, and received at a remote location (receiver). The integrity of the rail between the transmitter and receiver is in check as long as a signal is received. If the rail develops a clean break between the transmitter and receiver, the signal will not be received resulting in the triggering of an alarm.


UBRD System Components:

  • Transmitter module
  • Receiver module
  • Cabinet with power supply and communication equipment
  • Ultrasonic transducer and cable
  • Rail clamp
  • Alarm terminal


UBRD System Features:

  • Detection of clean breaks
  • Detection of large flaws
  • Notification of train presence
  • Continuous operation
  • Full rail coverage
  • Remote sensing of equipment failures
  • Scan intervals down to a few minutes
  • Robust, rust free components
  • Suitable for solar powered operation
  • Field proven reliability


Since its installation on South African state-owned company Transnet’s iron ore line in 2014, the UBRD has detected several rail breaks on the 846 km line running from Sishen to Saldanha, saving Transnet millions in potential damage costs. Armscor, Transnet, and the CSIR (for the transducer) are collaborating in developing a new generation UBRD, which is set to be even more cost-effective and efficient with the Department of Science and Technology (DST) mostly funding the research.

Armscor is promoting the UBRD internationally and there has been much interest from rail users such as India. India hosts the fourth longest rail network in the world with an operating route length of more than 65 000 km. The rail network is owned and operated by state-owned Indian Railways. The UBRD was tested in India at two different points on a 25 km stretch between Allahabad and Kanpur, and in the Moradabad Division. In its Annual Report for 2016/2017, Armscor reported that the requirement from Indian Railways will more than likely be for the UBRD to cover approximately 2000 km per annum. The UBRD is a positive example of collaboration and what could be achieved if South African research institutions and government entities worked together on projects of interest.


Written by Sylvia Caravotas (Satovarac Consulting) for OIDA


OIDA Strategic Intelligence – Commentary

• Everyone is keen to push for the sale of TKMS activities (from politicians to shareholders) and ThyssenKrupp CEO Heinrich Hiesinger appears to be attentive to the market about TKMS activities;
• Without the Naval Surface Vessel division, the submarine activity is not profitable;
• If TKMS is sold, the buyer will benefit from synergies, from cutting-edge knowledge and from a non-competitive German market. The buyer will also collaborate with important naval equipment suppliers such as Atlas Elektronik GmbH and its main subsidiary AEUK.
• Losing the MKS 180 contract means that TKMS has lost potential sales abroad and credibility regarding the fact that it has not been chosen by the German Navy.

OIDA Strategic Intelligence – Our Offer

• Understanding and identification of potential industrial synergies (product portfolio), value chain tracking (with subcontractors and suppliers)
• Identification of past/present/future business opportunities and monitoring of order intake • Key figures on actors (company profiling on Abeking& Rasmussen, Atlas Elektronik GmbH, Fassmer, German Naval Yards, Lürssen, Meyer Werft, TKMS but also Damen, Fincantieri, Naval Group, Navantia, Saab, Thales Underwater Systems and Ultra Electronics) AND markets (submarine, surface vessels, etc)
• Key figures on partnerships and monitoring of export customers
• Monitoring interest of TKMS’ sales offshoots.

What is going on?

ThyssenKrupp is stepping away from the shipyard business after having lost the MKS 180 contract (3.5bn€ /£3.07bn). This decision comes from the German Federal Government, as it loses out on constructing the MKS 180 ship to its rivals German Naval Yards and the Dutch Damen (DSNS). The German Federal Government plans to spend 3.5 billion Euros on four units and then an additional 1.5 billion Euros (£1.32bn) for two more units later on. This ship will likely receive interest from other foreign navies. TKMS’ other contracts are now on the line such as Egypt’s order of frigates.

The MKS 180 frigate is the most expensive and prestigious construction in the history of the German Navy. This loss can be perceived as a first foot in the door for foreign constructers into the German ship making industry. This could be the beginning of the end for national German ship making. However, it is conceivable that TKMS might build parts, and deliver components for the MKS 180.

TKMS is a leading company in terms of military ship and submarine making for the German navy. Until today it has had a near monopolistic position fostered by the German government. However, this contract was advertised Europe-wide instead of being nationally awarded. Indeed, government members are now pushing for a European consolidation and seem to be ready to let TKMS go. Shareholders are putting pressure on CEO Hiesinger to dispose of the TKMS holding which weighs on ThyssenKrupp results.

Concerning the MKS 180 bid, TKMS presented the highest price and doubts had arisen about if the ship maker could build such a large ship at all due to recent logistical and financial set-backs (late delivery of the K130 Corvettes, massive defects on the F125 Frigate).

Following this commercial failure several scenarios are under discussion: collaborating with competitors, selling off the branch, or, if no agreement is reached, giving up completely the company. Discussions with Naval Group and Lürssen Group are being considered as well. However for experts, if the Naval Surface Vessel division is sold, the Submarine business will most likely be on the line. The ship market is small, and the two intertwine on an engineering and purchasing level. Negotiations with Rheinmetall failed some years ago due to elevated prices.

Damen (DSNS), German Naval Yards and Lürssen have shown signs of teaming up, not only for the construction of the MKS 180, but to also to work as a consortium for other future projects.

Written by Benjamin Voisin (Finance Analyst) & Alexandra Stafferton (Junior Analyst) for OIDA Strategic Intelligence



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