Fincantieri signs an agreement to acquire Leonardo S.p.A.’s “Underwater Armament Systems” business.

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• The acquisition, which adds to that of Remazel Engineering S.p.A. ("Remazel"), accelerates and consolidates the Group’s position as a leader in the underwater and naval defense sector, in line with the announced strategy, following a series of industrial initiatives and agreements already in place.

• Upon completion of the transaction, Fincantieri will also acquire control over acoustic underwater technologies, which will represent a fundamental element in the Group’s growth strategy in the underwater sector—focusing on new military applications, innovative solutions for the security of critical underwater infrastructure, as well as new products for the civil sector.

• The consideration for the acquisition amounts to a fixed sum of Euro 300 million in respect of the Enterprise Value, subject to customary price adjustment mechanisms, plus up to Euro 115 million as a variable component contingent on the achievement of certain growth targets related to the performance of the UAS business line in 2024, for a total maximum Enterprise Value of up to Euro 415 million.

• To finance the acquisition, the Company has resolved to propose a proxy to increase, in one or more tranches, the share capital for a maximum amount of Euro 400 million, including any share premium, through a paid divisible capital increase, to be offered as an option to shareholders, and a connected reverse share split necessary for the capital increase. There is a subscription commitment from the controlling shareholder CDP Equity and a guarantee consortium formed by leading financial institutions.

• The proposal also provides that subscribers to the capital increase will be granted free warrants to be exercised in the future, against a second capital increase tranche for up to Euro 100 million.

Trieste, 9 May 2024 – Fincantieri today announced that its Board of Directors has approved and then signed an agreement for the acquisition from Leonardo S.p.A. (“Leonardo”) of the “Underwater Armament Systems” business line (the “Transaction”).

The completion of the Transaction, also considering the commercial cooperation agreements signed and the recent acquisition of Remazel, accelerates and consolidates Fincantieri Group's leadership as a technology integrator in the underwater and naval defense sector, in line with the announced strategy and following a series of previously formalized industrial agreements.

As a result of the Transaction, Fincantieri will acquire, in addition to torpedo production technologies, control over underwater acoustic technologies, which will represent a critical element in the Group's growth strategy in the underwater sector, focusing on new military applications, innovative solutions for the security of critical underwater civil infrastructure, and new products for the civil sector.

The Transaction, expected to be finalized at the beginning of 2025, will be subject, in addition to the fulfillment of typical conditions precedent for this type of transaction, to the transfer of the aforementioned business line into a new company ("NewCo").

The consideration for the acquisition amounts to a fixed sum of Euro 300 million as the Enterprise Value, subject to customary price adjustment mechanisms, plus up to Euro 115 million as a variable component upon achievement of predetermined growth targets related to the performance of the UAS business line in 2024, for a total maximum Enterprise Value of up to Euro 415 million.

Pierroberto Folgiero, CEO of Fincantieri, commented: “We are extremely pleased with this transaction, which represents a crucial milestone in our equity story and in the execution of Fincantieri’s underwater strategy for the coming industrial cycle. Underwater technological autonomy and global execution capabilities, in this new geopolitical and industrial context, will be the key differentiating factors, enabling Fincantieri to fully realize its potential for the benefit of the Group’s industrial and financial stakeholders.”

The Underwater Sector

The underwater domain is an increasingly important geopolitical area in relation to military issues and the security of critical underwater infrastructure such as gas pipelines, telecommunications, and power transmission cables, as well as the protection of marine mineral seabeds.

The Mediterranean in particular, as a crossroads between three continents and heavily populated with critical infrastructure, is a strategic domain of special significance, where intelligence, surveillance, defense, and deterrence activities are rapidly growing and require a dedicated industrial focus.

Fincantieri has inherited Italian leadership in the underwater sector dating back to the early 1900s with the first Italian submarine (“Delfino”). Between 1945–1968, Fincantieri's production and development were halted due to postwar restrictions. Production resumed from 1968, focusing on small/medium submarines (Toti and Sauro classes). From 1996 to 2019, Fincantieri strengthened its capabilities, in collaboration with ThyssenKrupp MS, to develop large submarines for the domestic market, introducing hydrogen fuel cell propulsion as an alternative to nuclear propulsion. Since 2019, Fincantieri has developed the first fully in-house submarine, designed new submarines for the Italian Navy, and built mini submarines and midget subs, expanding its exports to markets such as the Middle East, the Black Sea, and South-East Asia, not yet served by existing industrial offerings.

In addition, in 2023 Fincantieri, in partnership with the Italian Navy and sector-specialized companies, developed a proprietary solution for an underwater propulsion system based on lithium battery technology.

Also in 2023, the Group signed an agreement with Leonardo for initiatives related to sensors and electronic systems; with C.A.B.I. Cattaneo S.p.A., a leader in the design, development, and supply of underwater vehicles for Navy Special Forces; with Sonsub, Saipem S.p.A.‘s center of excellence specializing in underwater technology and solutions. In the civil sector, Fincantieri signed an agreement with WSense, a deep tech company specializing in underwater monitoring and communication systems; and, on 15 February 2024, completed the acquisition of Remazel, a global leader in the design and supply of complex topside equipment, including launch and recovery systems for underwater vehicles.

Description of the “Underwater Armament Systems” Business Line

Leonardo’s “Underwater Armament Systems” business line originated as a company (Whitehead Alenia Sistemi Subacquei S.p.A.) specialized in design and manufacture of underwater defense systems, especially torpedoes, countermeasures, and sonar. In early 2016, the company was merged into Leonardo, becoming a business line, and renamed "Underwater Armament Systems" (“UAS”). The business line also includes a 50% stake in GEIE EuroTorp (with Naval Group and Thales) dedicated to marketing the MU90 lightweight torpedo, and is based at two sites, Livorno and Pozzuoli. In 2023, the UAS business line generated revenues of approximately Euro 160 million and EBITDA of Euro 34 million.

Description of the Transaction

The Transaction involves the acquisition by Fincantieri of Leonardo's UAS business line, and consists of the following steps: (i) the transfer by Leonardo of the UAS business unit into NewCo, and (ii) Leonardo’s subsequent transfer of all of NewCo’s shares, free of any encumbrances, to Fincantieri. The consideration for the acquisition is a fixed amount of Euro 300 million for the Enterprise Value, subject to standard price adjustment mechanisms, plus up to Euro 115 million as a variable component upon achievement of predetermined growth targets for the UAS business line in 2024, for a total maximum Enterprise Value of Euro 415 million. Pro-forma for the Transaction and for the Remazel acquisition, the Group’s 2023 revenues total Euro 7,913 million and 2023 EBITDA is Euro 438 million, with a margin of 5.5% (+30bps compared to Fincantieri stand-alone).

The Transaction is a related-party transaction under the "Regulation on Related Party Transactions" adopted by CONSOB by Resolution No. 17221 of 12 March 2010 and subsequent amendments and integrations ("OPC Regulation") and per the internal regulation last updated on 10 June 2021 by Fincantieri’s Board of Directors—specifically, it qualifies as a “major” related-party transaction. Therefore, the Transaction was preliminarily reviewed, on 7 May 2024, by Fincantieri’s Internal Control and Risk Management Committee, which, as the competent committee for related-party transactions, unanimously issued a favorable opinion. The information document pursuant to Article 5 of the OPC Regulation will be published as per legal and regulatory requirements.

Strategic Rationale for the Transaction

The underwater market presents a significant growth opportunity for Fincantieri for several reasons:

• Fincantieri already possesses in-depth knowledge of the underwater sector thanks to its long-standing history in building submarines, mainly (but not exclusively) for the Italian Navy. Throughout its history, Fincantieri has built 180 submarines;

• The addressable underwater market (both civil and defense-related) is expected to experience exponential growth over the coming years (with a total addressable market value of Euro 100 billion over the 2024–28 period, and an average annual growth rate of 15%^[1]). This represents an opportunity for Fincantieri to expand its leadership in an emerging sector that requires technological solutions and serves demand not yet covered by existing industrial supply;

• The evolution of the underwater sector towards a complex, diversified environment with multiple technologies increasingly highlights the need for a player capable of consolidating and pooling presently fragmented industrial underwater expertise, currently concentrated among SMEs;

• The creation of the National Pole for the Underwater Dimension (PNdS), a strategic hub for cooperation between public and private entities aimed at promoting, developing, and coordinating synergies among Italy’s various centers of excellence in the underwater sector, represents an opportunity to position Fincantieri as the natural leader, first affirming its capabilities in the defense sector and then expanding into civil applications.

• The UAS business line is the national leader in all underwater product lines, with a leading position in the torpedo market, strong positioning in the countermeasures market, and excellent growth prospects in sonar. Thanks to its cutting-edge technological capabilities, UAS enjoys a strong position in the European Union, Middle Eastern and Far Eastern markets.

Financing of the Transaction

In view of the need for a flexible capital structure aligned with the Group’s growth strategy as outlined in the 2023–2027 Industrial Plan, the Transaction is expected to be financed through a rights issue.

Specifically, the Board of Directors of Fincantieri, meeting today, resolved to submit for approval by the Extraordinary Shareholders’ Meeting, to be held on 11 June 2024 in a single call, a proposal to grant the Board the power, pursuant to Article 2443 of the Italian Civil Code, to increase the share capital for a maximum total of Euro 400 million, including any share premium, through a paid divisible share capital increase by issuing ordinary shares offered as an option to eligible shareholders pursuant to Article 2441, paragraph 1, of the Italian Civil Code (the "Capital Increase").

To promote widespread subscription, the proxy proposal also provides that the shares issued in the context of the Capital Increase are to be coupled with free warrants entitling the holders to subscribe for newly issued Fincantieri shares arising from a further paid, divisible, time-limited capital increase supporting the exercise of the warrants, up to a maximum amount of Euro 100 million, exercisable within 36 months and in addition to the amount of the Capital Increase. The warrant proxy proposal will also be submitted to the same Extraordinary Shareholders' Meeting for approval.

The issue of warrants will also allow shareholders who subscribe for shares arising from the Capital Increase to benefit from any future appreciation in Fincantieri stock resulting from execution of the Industrial Plan.

The price of the rights issue (cum warrant) and the maximum number of shares to be issued, as well as all further warrant characteristics, will be determined by the Board of Directors closer to the launch of the rights issue offer.

The Capital Increase is supported by a subscription commitment, subject to certain conditions precedent customary for similar transactions, entered into today by the controlling shareholder, CDP Equity S.p.A., for up to a maximum of Euro 287 million, corresponding to its entire pro-rata share of the Capital Increase.

Additionally, in connection with the Capital Increase, BNP Paribas, Intesa Sanpaolo, Jefferies, JP Morgan, and Mediobanca will act as Joint Global Coordinators and Joint Bookrunners under a pre-underwriting agreement signed today with Fincantieri, committing (subject to market-standard conditions) to sign an underwriting agreement to subscribe for any new shares not taken up following the auction of unexercised rights, up to the maximum amount of the Capital Increase, net of the subscription commitment made by CDP Equity S.p.A.

As customary, the underwriting agreement relating to the Capital Increase will be finalized, subject to the conditions set forth in the pre-underwriting agreement, immediately prior to the launch of the rights offering, once the Board has set the final terms of the Capital Increase.

The Capital Increase is expected to be completed within the current financial year 2024, subject to market conditions and contingent on receipt of the delegation to increase the share capital by the Extraordinary Shareholders’ Meeting and the necessary authorizations from competent authorities.

The Board has also resolved to submit to the Extraordinary Shareholders’ Meeting a share consolidation proposal connected to the Capital Increase, with the consolidation ratio to be determined by the Board, within the limit of one new share for every maximum of ten existing shares. The consolidation is expected to take place prior to commencement of the rights offering for the Capital Increase.

Finally, the Extraordinary Shareholders’ Meeting will also be called upon to resolve on granting the Board of Directors authority to, if appropriate, approve a further paid capital increase, possibly in several tranches, excluding shareholders’ pre-emptive rights, as permitted by Article 2441, paragraph 4, of the Italian Civil Code, within the limit of ten percent of the pre-existing share capital at market value, starting from the eighteenth month after the date the delegation is granted by the General Meeting and until the fifth anniversary of such date, for the pursuit of growth and strengthening strategies, enhancing existing investments, and, more generally, meeting future financial and growth needs of the Company.

The explanatory reports of the Board of Directors on the proposals to be submitted to the Shareholders’ Meeting, pursuant to Article 125-ter of Legislative Decree no. 58/1998, will be made available through the authorized eMarket STORAGE mechanism and at the company’s registered office in accordance with legal deadlines; a copy of the report will also be available on the Company’s website at www.fincantieri.com.

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The Board of Directors of Fincantieri, which met today, also resolved to call both an Extraordinary and an Ordinary Shareholders’ Meeting, on 11 June 2024 in a single call, to resolve on a proposal to adjust the compensation of the members of the Board of Statutory Auditors.

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In the acquisition of the UAS business, Fincantieri was advised by Deutsche Bank AG, Milan Branch, as sole financial advisor and by Deloitte for due diligence activities. For the envisaged capital increase, BNP PARIBAS, Intesa Sanpaolo, Jefferies, J.P. Morgan, and Mediobanca will act as Joint Global Coordinators and Bookrunners, guaranteeing any unsubscribed shares. Fincantieri is advised by Legance Avvocati Associati as legal advisor; the Joint Global Coordinators and Bookrunners are advised by Clifford Chance; CDP Equity is advised by Gianni & Origoni as legal advisor and by BofA Securities as financial advisor in relation to the subscription commitment.

Conference Call for Analysts and Institutional Investors on Q1 2024 Results and UAS Acquisition

On 14 May at 15:30 CET, a conference call will be held for analysts and institutional investors with Fincantieri’s CEO and General Manager, Pierroberto Folgiero, and CFO, Giuseppe Dado, to discuss the first quarter 2024 results and present further details on the acquisition of the UAS business line. For further information on the conference call:

https://www.fincantieri.com/globalassets/comunicati-stampa/price-sensitive/2024/fincantieri-invito-alla-conference-call-dei-risultati-q1-2024.pdf

[1] Source: Fincantieri elaboration on Janes database