Safran to acquire L-1 Identity Solutions' businesses

Safran (NYSE Euronext Paris: SAF) announced today that it has entered into a definitive agreement with L-1 Identity Solutions (NYSE: ID), a leading identity management provider in the United States, for Safran to acquire the operating and holding company of L-1 and its biometric and enterprise access solutions, secure credentialing solutions and enrollment services businesses, for a total cash amount of USD 1.09 billion. These businesses had 2009 revenue of USD 436 million and recorded a backlog of USD 1.1 billion at end of 2009. The transaction would create an industry-leading provider of solutions for the fast-growing high-tech homeland security market and generate strong growth in revenue and earnings, while yielding significant operating synergies.

Prior to this agreement and as a condition to the transaction, L-1 entered into a definitive agreement to sell its government consulting services business for USD 295 million to a third party, and therefore this business would be excluded from the transaction with Safran.

Overview of the transaction

Under the terms of the agreement with L-1, Safran would acquire 100 % of L-1's shares, with the following characteristics:

- L-1 shareholders would receive USD 12.00 per L-1 share in cash, an implied premium of 31.2 % over L-1's 30-day average closing price of USD 9.14 for the period ending on September 17 2010; - The estimated Enterprise Value of the business acquired by Safran is USD 1.19 billion, taking into account L-1's estimated net debt at closing of approximately USD 100 million which includes the cash proceeds from the prior sale of the government consulting services business; - The run-rate operating cost synergies are expected to represent approximately USD 30 million, which would be fully realized within 18 months from the closing of the transaction; - The transaction, thanks to operating synergies, is expected to be accretive to Safran's earnings from year one, excluding non cash and one-off items and purchase accounting adjustments (PPA); - Safran intends to fully finance the acquisition with existing cash on hand; and - The boards of directors of both L-1 and Safran have unanimously approved the transaction.

Creates an industry-leading provider of solutions for hightech homeland security

Following the closing, Safran intends to operate L-1 as part of its existing security business, Morpho, in accordance with US national security regulation, to create an industry-leading provider of solutions for high tech homeland security. Benefits would include:

- A highly complementary combination of security technology and products that would offer enhanced ID solutions with best-of-class products in all their offerings; - A combination of the best ID management solutions and detection of illicit and dangerous materials providing an offer of the highest standards for travel security; - A broad geographical fit with balanced operations in around 40 countries and approximately Euro 1.35 billion in 2009 pro-forma[1] revenue (comprised of USD 436 million from L-1's businesses); - A combination of outstanding teams, that would share a strategic vision and be positioned to address the high growth and attractive potential of global biometric and identity management requirements; and - A combination of deep experience from both firms in serving in the United States and elsewhere, with the highest standards of quality, high profile public and governmental customers.

Commitment to U.S. stakeholders

With more than 4,000 employees working at 40 locations across 18 states, Safran's sales to U.S. customers represented approximately Euro 2.5 billion in 2009 revenue. It should be noted that CFM International, founded in 1974, is a company equally-owned by Safran and GE and the most successful venture in the history of civil aviation. The two companies agreed in 2008 to extend their cooperation until 2040. Safran is a long standing and trusted partner, having served for decades a large spectrum of key contributors to the U.S. economy such as Boeing, Lockheed Martin, as well as eight out of the ten largest U.S. airlines and notable U.S. government agencies, including the U.S. Armed Forces (the Army, Navy, Air Force, Marine Corps and Coast Guard), the FBI, a significant number of law enforcement organizations and entities in U.S. cities and states, and the U.S. Transportation Security Administration - among others. L-1 would benefit from Safran's technology, extended geographical reach, financial and management capabilities to further assist the company in accelerating the growth of its strong business in the United States and expansion in global key territories.

This transaction builds on Safran's previous successful transactions in 2009 in this sector in the United States: the acquisitions of Motorola's Printrak biometrics business (merged with Morpho US biometrics activities to become MorphoTrak) and of GE's Homeland Protection unit[2] (rebranded Morpho Detection). The combined activities of Morpho and L-1[3] would have generated 2009 pro forma sales to U.S. customers of more than USD 700 million with around 2,200 employees in the United States.

Following this transaction, Safran would continue to strengthen the combined R&D teams. In doing so, the companies expect to build the next generation of excellence in biometrics and ID management and enhance the combined group's competitiveness in all territories, for the benefit of customers.

Jean-Paul Herteman, Chief Executive Officer of Safran, said: "I have a deep respect for L-1's business and its contribution to the security industry. We are all highly impressed with the quality and expertise of L-1's teams throughout the United States and we are looking forward to working with them to bring L-1 and Morpho together. This will allow us to grow L-1's business, while expanding the reach of L-1's services to other key territories around the world. With this acquisition, Safran's pro forma 2011 revenues from its security business, focused on detection, biometrics and identity management is likely to exceed 15% of the Safran's global revenue. The expected organic growth of these activities should enable the group to reach its 20% revenue target for its security business swiftly. Furthermore, this constitutes a significant step in the implementation of Safran's clearly defined strategy to be a leader in the field of mission critical high tech tier one players in the group's three businesses: Aerospace, Defence and Security."

"I am extremely proud of L-1's accomplishments and the role we have played in the development of multi-modal biometric technologies and in helping establish the identity management market over the last four years," said Robert V. LaPenta, Chairman, President and CEO of L-1 Identity Solutions. "Safran will provide a strong global reach and a more comprehensive portfolio of solutions and services in order to leverage the industry's best set of collective experience and solutions, all to the benefit of our customers and partners worldwide. Safran's commitment to furthering the standards of quality and excellence in engineering innovation will ensure that we can continue to lead the market in developing superior identity management solutions."

The transaction is subject to L-1' shareholder and regulatory approvals, including review by the U.S. Antitrust Authorities, the Committee on Foreign Investment in the United States (CFIUS), as well as the satisfaction of other customary closing conditions.

RBC Capital Markets Corporation and Societe Generale Corporate and Investment Banking are acting as joint financial advisors and Weil, Gotshal, Manges and Kaye Scholer are acting as international legal counsels to Safran. The Chertoff Group is serving as a strategic advisor to Safran. The complete terms and conditions of the agreement will be filed with the U.S. Securities and Exchange Commission.

SOURCE SAFRAN