Sagem, world’s No. 8 handset maker, to go to venture capital firm: Owner Safran to take $343M hit as part of deal

Safran said it will swallow $343 million to spin off its troubled Sagem Mobiles division to venture capital firm Sofinnova.
Sofinnova plans to rebrand the handset manufacturer as Sagem Wireless, with Safran holding a 10% stake. The company will develop and market products under other brands for operators or other manufacturers, as well as for fashion and sports firms as well as producers of high-end goods.
Safran will take the $343 million hit in handover charges and write-downs.
Sagem Wireless will claim 310 employees of the former Safran outfit, 240 of whom will be based in China. Another 250 members of Sagem Wireless’ research and development team will be transferred to Esmertec and Purple Labs – companies in which Sofinnova is an investor – and will be stationed at Sagem Wireless’ Paris headquarters.
“I am convinced that this will be a successful solution, because the ODM (original design manufacturer) business model clearly addresses specific needs, while at the same time we will reduce our fixed costs by integrating the R&D teams from Sagem Mobiles and companies in the Sofinnova portfolio,” said Safran CEO Jean-Paul Herteman.
Sagem Mobiles is the eighth-largest phone maker in the world, according to IDC, and rang up just over $1 billion in sales last year. The company will continue to operate as it has until the transaction’s close, which is expected by the end of the year.
The move comes amid much activity in the mobile handset space. Five private equity firms currently are in talks with Huawei Technologies Co. Ltd.’s after each bid about $2 billion apiece for an approximately 50% stake in the company’s handset business, according to news reports that Huawei has confirmed. Meanwhile, Motorola Inc., the world’s third largest handset maker by volume, is hoping to spin off its troubled cellphone business.