ROME and PARIS -- The consolidation of Europe's naval industry has taken a first, hesitant step with the approval of the purchase by Italy's Fincantieri of a 48 percent stake in the French shipbuilder STX.



The green light from the French government for the deal will put Italy's state-controlled builder of frigates and submarines in the driving seat at the only European yard big enough to build aircraft carriers.



Crucially, as part of the deal, the French government brought in state-owned DCNS with a shareholding reported to be some 12 percent, putting Italy and France's top naval shipbuilders in the same corporate boardroom for the first time.



"Fincantieri and DCNS have teamed on naval programs before, but this means a more structural relationship in the running of a yard which recently built Mistral helicopter carriers, and it could be the first step towards a naval Airbus, built on an Italo-French foundation," said Francesco Tosato, an analyst at the Centro Studi Internazionali think tank in Rome.



Acquiring the stake will not only win DCNS a seat on the board of directors but also help the French and Italian firms make joint offers on the export market, a DCNS spokesperson said.



"This will ensure the protection of France's strategic interests while strengthening our export capacity," DCNS chairman and CEO Hervé Guillou said in a statement. The deal would help "our shared ambition to develop industrial cooperation between France and Italy in the naval sector," he added.





The deal, which was announced on Thursday by French industry minister Christophe Sirugue, will see Fincantieri take 48 percent in the yard and DCNS some 12 percent, while the French government will keep its 33.3 percent stake.

The remaining 6.6 percent will be taken by Italian investment body Fondazione CR Trieste. Promoted by Fincantieri as a blueprint for European integration, the agreement came close to being scrapped due to French public sentiment to protect jobs at the shipbuilder at Saint-Nazaire, northern France, a key base in regional politics.

Things got underway last year when STX’s then-owner, Korea’s STX, went bankrupt, leaving its controlling 66.66 percent stake in the yard up for sale. Fincantieri was named as the preferred bidder, with the French state hanging on to its 33.3 percent stake.

The prime objective of Fincantieri CEO Giuseppe Bono was to take over the healthy, €12 billion ($12.7 billion) order book for cruise ships held by the STX French unit, a sector in which Fincantieri is also thriving.

But opposition to the deal soon grew in France, with unions fearful of job losses, and politicians wary of losing votes ahead of presidential elections in just over a week.

Several presidential candidates opposed a Fincantieri acquisition, and former prime minister François Fillon, the candidate for the conservative Les Républicains, called for the yard to be nationalized.

× Fear of missing out? Sign up for the Early Bird Brief, the defense industry's most comprehensive news and information, straight to your inbox. Thanks for signing up. By giving us your email, you are opting in to the Early Bird Brief.

That drew a fierce response from Claudio Costamagna, head of the Cassa Depositi e Prestiti, the state investment fund which controls Fincantieri, who called the resistance "shameful and unacceptable," given the large number of Italian firms which have been snapped up by French buyers in recent years.

"At the end of the day, the French likely decided not to be too protectionist since it would have put an end to further French investments in Italy," said Tosato.

The deal laid out this week by Sirugue requires Fincantieri to hold a stake below 50 percent for eight years, while pushing the Italian firm to find a smaller private shareholder "independent of Fincantieri".

That explains the 6.6 percent share taken by Fondazione CR Trieste, which operates in the Italian northeast, close to Fincantieri’s headquarters, and was approached by Fincantieri’s Bono.

The arrangement puts the Italian shareholding bloc above 50 percent, but split between two independent companies, as requested by France.

"We are not on board to take orders from Fincantieri, we are there to support Italian industry to create a critical mass with French industry," said a source at Fondazione CR Trieste.

The French deal gives Paris the right of veto, allowing the government to block any big cut in work for the design office or the shipyard, transfer of intellectual property rights, and any strategy that undermines the defense interests of the nation.

The government will hold those veto rights for 20 years, with a review after 12 years. Fincantieri is also committed to allowing STX to respond independently to tenders. The deal is not done yet, as the pact needs to be submitted to labor unions for mandatory consultation, as required under French labor law.

There is concern among the unions that STX could cut French jobs if the Italian parent company fell into difficulty. Labor unions are also worried about Fincantieri’s joint venture with China State Shipbuilding Corp., seen as opening the door to a transfer of sensitive French technology to the Asian partner.

DCNS and Fincantieri worked together as industrial partners and respective prime contractors on the French and Italian Horizon air defense frigate and multimission frigate. The level of joint procurement of subsystems fell sharply from the former to the latter.