defense industry

Making the Shipping News

iskandar patrice lapoirie
Iskandar Safa at home in France.
  • Why it matters

    Why it matters

    As one of Europe’s biggest defense contractors, Iskandar Safa wants to take advantage of consolidation in the industry and move into the German market.

  • Facts

    Facts

    • Mr. Safa’s holding company, Privinvest, operates hotels, develops real estate and is active in the media industry.
    • In addition to having a profitable yacht-building business, Privinvest is one of Europe’s major defense contractors.
    • Privinvest is vying for a €4 billion contract to build four multi-purpose warships for the German navy.
  • Audio

    Audio

  • Pdf

Iskandar Safa lives high above Cannes in an estate that consists of vineyards, olive groves and large sculptures.

That’s where he mulls on his plans for the defense industry, while managing his rosés.

When he isn’t in France, Mr. Safa divides his time between London and Abu Dhabi.

A businessman from Lebanon with a French passport, he is one of Europe’s biggest shipbuilders.

Together with his brother Akram, he runs the Privinvest holding company. They control a group of shipyards with locations in France, the United Kingdom, Greece and the United Arab Emirates. In Germany, the group also owns the Lindenau, Nobiskrug and HDW Gaarden shipyards.

Right now, as Europe’s defense industry realigns, Mr. Safa has a lot to think about.

Last week two tank manufacturers, Munich-based Krauss-Maffei Wegmann and French competitor Nexter, finalized their merger. The market for military aircraft is already largely consolidated under Airbus.

And now, Katrin Suder, state secretary in the Germany’s defense ministry, says shipyards may also be affected as demand falls for military vessels. European governments are cutting costs, including military spending.

Mr. Safa is likely to play an important role in the process of consolidation.

A 60-year-old who seems young for his age, he collects companies. Privinvest operates hotels, develops real estate and is active in the media industry.

Mr. Safa is better known in France than in Germany; he has excellent contacts in the government. A Christian, he was reportedly wounded twice in the war in Lebanon. He also helped negotiate hostage releases in the Middle East in the 1980s.

His network of contacts includes the head of Rheinmetall, Armin Papperger, and the head of Thyssen-Krupp Marine Systems (TKMS), Hans Christoph Atzpodien.

Mr. Safa does business with governments and the super-rich who buy mega-yachts from him; he avoids the public eye and rarely gives interviews. His wealthy customers often prefer the splendor of their yachts not to become public knowledge. His group is building two mega-yachts right now and demand from South America and Russia is strong, he said. “Eventually the Chinese will join the pack.”

As profitable as his business with the moneyed elite is, Mr. Safa’s military clients are more important.

Next to TKMS and the French DCNS Group, Privinvest is one of the major defense contractors in Europe.

Armed forces from more than 30 countries guard their coastlines with vessels made by Privinvest companies, Mr. Safa said. They make up a substantial portion of Privinvest’s €1 billion, or $1.09 billion, in annual sales.

That number could soon increase. Germany wants to acquire four MKS 180 multi-purpose warships for about €4 billion. To improve its positioning for the potential deal, the group shed its temporary name Abu Dhabi MAR. Now, the German shipyards are called German Naval Yards (GNY).

Next to a consortium of TKMS and Lürssen, the group is considered a front runner.

Until now, Mr. Safa’s German shipyards were an extended workbench for the competition; GNY is producing two frigates for Algeria, as a subcontractor to Thyssen-Krupp, in northern Germany. The Algerian ships will reportedly be finished on time, whereas the German navy is still waiting for submarines and frigates it has ordered.

Mr. Safa doesn’t want to capitalize on this; he said competitors TKMS and DCNS are well positioned.

He keeps his tone neutral; he believes business may soon pick up.

“The naval shipyards in Europe need consolidation. I believe that Germany and France are the natural axis for that,” he said. Other nations may become involved later but the process must revolve around these two countries.

There have been repeated attempts to consolidate naval shipyards in Europe, often revolving around DCNS and TKMS. Until now, national interests and egos stood in the way.

But now Thyssen-Krupp plans to pull out of the business, consolidation may be possible. Last year, the company was in negotiations with defense contractor Rheinmetall but the talks failed when Thyssen-Krupp demanded twice the €1 billion Rheinmetall was offering.

The plan is not yet off the table. TKMS will run into trouble if it is left out of the MKS 180 project, according to insiders. That means there is more pressure to sell.

By his own account, Mr. Safa is interested in acquisitions, “if they’re a good fit and can be financed.” He has the necessary assets, with industry estimates of his net worth ranging from €500 million to €1 billion.

Industry insiders believe that Privinvest is interested in TKMS’s above-water business, which essentially consists of Hamburg-based Blohm & Voss.

But the company’s submarine-building division, based in Kiel, will likely be too big for the privately held company. Mr. Safa did not comment on the potential deal.

But there are not likely to be hurdles from the side of the German government. According to an insider, if the merger between KMW and Nexter goes ahead, “Berlin won’t be able to veto the naval shipyards.”

In addition, Privinvest already has a presence in Germany, with GNY. Many defense policy experts attended the recent opening of Mr. Safa’s Berlin office. The guests also included three state secretaries, including Ms. Suder.

“The chances of winning the contract for MKS 180 are unexpectedly good,” says an insider.

It’s a strong position for the pending consolidation.

 

Martin Murphy specializes in the automotive and defense industries. To contact the author: murphy@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!