creation of a global leader in biometrics and identity ... · outstanding technology fit: l-1 iris...

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Acquisition of L-1 Identity Solutions

Creation of a global leader in biometricsand identity management solutions

September 20, 2010

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Speakers

Agenda & speakers

JP.Herteman - CEO

R.McInnes - CFO

O.Andriès - EVP, Defence & Security branch

Key transaction highlightsMarket and business overviewRationale for the combinationConclusion

Agenda

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Part 1Key transaction highlights

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Creating a global leader in biometrics and ID management solutions

Safran to acquire the biometrics & enterprise access solutions, secure credentialing solutions and enrollment services businesses of L-1, a US-based leading global identity management provider

Transaction conditioned upon sale of L-1’s government consulting services (GCS) businesses to a third party and regulatory approvals

Significant step in the implementation of Safran’s strategy to develop as world leader in the field of mission critical high tech tier one players in the group’s three businesses: Aerospace, Defence and Security

Combination will provide an ideal platform to accelerate growth, notably in the U.S., and expand into new territories

Highly complementary businesses with a strong fit and compelling product, geography and client-mix

All-cash offer, fully financed with Safran’s existing cash on-hand

Accretive from year one with operating synergies

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Scope of transaction

Secure credentialing Enrollment servicesBiometrics & Enterprise access solutions

Major North American provider of secure credentialing solutions for both Federal and state programs

Ø Contracts with 44 out of 50 U.S. State Departments of Motor Vehicles

Ø Produces 100 million credentials annually

Ø Long-term contracts with 5-7 year term

Global supplier of multimodal biometric solutionsØ State Department Visa issuance program –

85 million record databaseØ More than 13,000 mobile devices fielded

in areas of conflict

Major North American provider of biometric-based identity vetting for Federal and state programs

Ø Operates over 1,000 enrollment centres across the US and Canada

Ø Captures 2+ million identities annually, including biometric & biographic data

2009: Revenue of $ 436MEnd 2009: Backlog of $ 1.1bn (2.5 years of annual sales)

Market CAGR2009-2014 expected at c.15%

A growing and profitable business2.5-year backlog providing resilience

L-1: a solid business with recurring revenue

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Key reasons for transaction

1. Double digit growth of ID management market. The U.S. weight 25% of global current market. Perfect geographic fit:Ø 2009: Safran’s security-related proforma* sales to non-U.S. customers = 79%

L-1’s sales (excluding GCS) to U.S. customers = 87%Ø Outstanding development perspectives for U.S. based L-1 teams

2. Outstanding technology fit : L-1 iris and facial recognition leading position complementing Morpho’s fingerprint recognition leading position

3. L-1 comprehensive offer in biometric equipment : Livescan and mobile ID devices at the forefront of technology

4. L-1’s leading position in secure credentials in the U.S., especially driver licences and the Real ID opportunity, complementing Morpho’s position outside the U.S.

5. Strong resilience of L-1 secure credentials and enrollment / background check businesses : strong backlog ($ 1.1bn), long-term contracts (5 to 7 years), largest US enrollment network

* Unaudited 2009 figures provided on a pro forma basis, taking into account the acquisitions of Printrak and GE Homeland Protection on a full year basis

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Key terms of the transaction

Acquisition by Safran of 100% of the stock of L-1 for cash, excluding its government consulting services (GCS) businessØ Government consulting services businesses sold to a third party for $295 M (before tax)Ø Safran’s purchase conditioned upon closing of GCS sale and regulatory approvals

Structure

$12.00 per share in cash , for a total cash consideration of $1.09 BnRepresents a premium of 31.2% over L-1’s 30 day average trading price of $9.14Consideration

Financed entirely with available cash on Safran’s balance sheetFinancing

(1) Based on estimated L-1 net debt at closing; adjusted for transaction costs and estimated value of tax benefits.

L-1 Identity Solutions effective Enterprise Value of $1.19 Bn following sale of government consulting services (GCS) businesses (1)Enterprise value

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Key terms of the transaction

Thanks to operating synergies, transaction expected to be accretive to Safran earnings from year 1, excluding non cash and one-off items and purchase-accounting adjustments (PPA)

Includes the benefit of approximately $330 M of U.S. Federal net operating losses, after reduction for gain from the sale of the government consulting services (GCS) businesses. The Net presentValue of these NOLs comes in deduction of net debt

Identity Solutions is expected to generate $530+ M in revenue and $100 M in EBITDA in 2011

The combination of L-1 and Safran (Morpho) is expected to yield significant operating cost synergies within 18 months after the effective closingØ These are conservatively estimated at $30 M run-rate and do not include likely top-line

commercial synergies

Financial impact

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Transaction process overview

U.S. Antitrust / Hart-Scott-Rodino (HSR) and Non-U.S. CompetitionCommittee on Foreign Investment in the United States (CFIUS)

Regulatory approvals

Safran - no shareholder vote requiredL-1 - majority shareholder vote required Ø Voting and support agreement signed by certain shareholders of L-1 holding in the aggregate

approximately 14% of L-1 shares (R. LaPenta and Aston Capital Partners L.P.)

Shareholder vote

Proxy materials to be filed following signing of merger agreementL-1 special meeting of shareholders to take place as soon as practicable after mailing of proxy materialsØ Requirement to obtain affirmative vote of holders of at least 50% of outstanding shares + 1Ø NYSE delisting; no residual minority shareholders

Merger transaction

Upon receipt of regulatory approvalsClosing

Closing of GCS businesses sale must occur on or before the closing of the Identity saleAll-cash $295 M purchase price (before tax)Ø Cash proceeds to reduce L-1’s debt

Sale of Government Consulting Services

A one-step merger

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Key transaction metrics

100% of L-1 stock at $12.00 per sharePremium over 1 month averageEquity value including warrants and options cash out

$1,079M31.2%

$1,091M

Less: Disposal of government consulting services (GCS) businesses (net proceeds before tax)

$ (295) M

Plus: Estimated debt at closing and adjustments for NPV of NOLs and taxes due on GCS disposal

$ 398 M

Enterprise value of business acquired $ 1,194 M

Indicative 2011e EBITDA * approximately $100 M

Run-rate cost synergies approximately $ 30 M(within 18 months after the closing)

(*) EBITDA excludes purchase accounting adjustments (PPA) and one-off items

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Part 2Market and business overview

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ID management: attractive fundamentals with strong prospects

> $ 9 Bn global market in 2014c.15% CAGR since 2007Significant U.S. and international growth opportunitiesIdentity security increasingly important worldwide

Market Overview

Documents: travel documents, ID cards, health cards, drivers’ licenses, voting cards

Systems & Services: biometric and multi-biometric engines: population registry, documents personalization and issuance systems, e-border and access control systems

Products: biometric enrollment stations, mobile ID verification terminals, biometric terminals, e-gates

Market Offer

Opportunity to build an integrated global player

A GROWING DEMAND A DIVERSIFIED OFFERING

In the US: Department of Homeland Security initiatives to improve security : i.e. Real ID Act, Transportation Worker Identification Credential (TWIC), etc…Worldwide: Launch of election and welfare programs in a growing number of countries

Favourable political framework

Secure ID documents against fake ID, ID theft and welfare fraudProtect military personnel and civilians in areas of conflictHelp law enforcement guard the public from crime through improved suspect identificationIdentify terroristsProvide intelligent access control for secure buildings IT systems, and more secure border crossings for travellers

Increasing needs

+

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L-1: a US-based leading global identity management provider

Secure credentialing Enrollment servicesBiometrics & Enterprise access solutions

Major North American provider of secure credentialing solutions for both Federal and state programs

Ø Contracts with 44 out of 50 U.S. state Department of Motor Vehicles

Ø Produces 100 million credentials annually

Global supplier of multimodal biometric solutions

Ø Leading iris and facial recognition capabilities

Ø Deep relationships with the U.S. Armed Forces, the U.S. Transportation Security Administration and the U.S. Coast Guard

Ø Impressive portfolio of intellectual property

Ø Turnkey solution offerings

Major North American provider of biometric based identity vetting for Federal and state programs

Ø Operates over 1,000 enrollment centres across the US and Canada

Ø Captures 2+ million identities annually including biometric & biographic data

Passports, IDs

Kiosks

Established in 2006, L-1 is a leading provider in U.S.; $436 M revenue in 2009HQ located at Stamford (CT), 1,300+ employees worldwide(1) operating in over 20 countriesFive primary business segments addressed:

U.S. and foreign military services, border management, law enforcement, civil programs, commercial

Three operating divisions offering customized and interoperable solutions and services

HIIDE

PIER

3D Face Reader

IBIS

(1) Excluding Government Consulting Services (GCS) and corporate overhead

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Safran : a global, world-class high-tech Security business

Biometric ID

Security is one of Safran’s three core businesses together with Aerospace and Defence and is a key pillar of its growth strategyPro forma revenue in security reached € 1,040 M in 2009 worldwide, towards:

Governmental organizations (c. 67% of rev’s) & commercial organizations (c. 33% of rev’s)

HQ located in Montrouge (France), Safran’s security business has 5,600+ employees worldwide operating in around 40 countries

Detection Smart Cards Others

MAIN PRODUCTS & SOLUTIONS4 Civil and Forensic ID solutions4 Biometric Identification Systems4 Biometric ID documents 4 Biometrics terminals

SERVICES4 enrollment & doc. issuance4 Background check4 Upgrades and maintenance

Recurring revenues

MAIN PRODUCTS4 Checked baggage screening4 Trace detection4 Checkpoint solutions4 NRBC for 1st responders

SERVICES4 Upgrades and maintenance4 Multiplexing solutions

Recurring revenues

Recurring revenues

MAIN PRODUCTS4 SIM cards for Telecoms4 Banking cards

SERVICES4 Personalization

MAIN PRODUCTS4 Vehicle speed control and

identification4 Lottery terminals

SERVICES4 Upgrades and maintenance

Recurring revenues

Unaudited 2009 figures provided on a pro forma basis, taking into account the acquisitions of Printrak and GE Homeland Protection on a full year basisRecurring revenues = services, upgrade, maintenance, consumables related to long-term contracts

25% 20%33% 25%62% 20%

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Safran’s security business has deep U.S. roots

U.S. clients and end users at all levels of Government U.S. Federal GovernmentØ DEA - US Drug Enforcement AgencyØ FBI - Federal Bureau of InvestigationØ TSA - Transportation Security AdministrationØ US Army Crime Lab

State, County and City AgenciesØ Police and Sheriff’s DepartmentsØ Justice DepartmentsØ State AgenciesØ Ports & AirportsAs well as other businesses(1) Morpho Detection is co-owned by Safran (81% stake) with GE (19% stake)

Safran: € 2.5 Bn of sales to US customers in 2009; 4,000 employees, 40 locations across 18 states

Committed to U.S. customers and stakeholders

2009 Motorola Printrak (merged with Morpho US Biometrics to become MorphoTrak)Biometric solutions to US and Canadian Federal, State, province and local governments and commercial markets in law enforcement, border control, access control and ID management

2009 GE Homeland Protection (1) renamed Morpho DetectionLeading supplier of explosives and narcotics detection systems for government agencies, air and ground transportation venues, energy and other high-risk organizations and facilities, and the military

Key U.S. acquisitions Long Term US commitment35+ years - GE / Snecma engine partnership

(CFM International)35+ years - MorphoTrak (Biometric ID solutions)30 years - Turbomeca (Helicopter engines)24 years - Labinal (Aircraft wiring systems)

2008 - 3 new “greenfield” sites in the U.S.Walton, KY Monroe, NCGrand Prairie, TX

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Part 3Rationale for the combination

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A highly complementary combination of security technology and products that will be second to none in offering enhanced ID solutions with best of class biometrics and secure credentials technologies

A combination of the best ID management solutions and detection of illicit and dangerous materials enabling an offer of the highest standards of travel security

A broad geographical fit with balanced operations in around 40 countries and approximately € 1.35 Bn in 2009 pro forma revenue (of which $436 M from L-1’s businesses)

A combination of outstanding teams, sharing a strategic vision and ideally positioned to address the high growth and attractive potential of the biometric and identity management requirements

A combination of deep experience from both firms in serving in the U.S. and elsewhere with the highest standards of quality

A transformational transaction with a strong strategic fit

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(1) Combination of L-1 and Safran (Morpho) in the U.S.

N.B: Figures are 2009 provided on a proforma basis, taking into account the acquisitions of Printrak and GE Homeland Protection on a full year basis

4Total Employees in the U.S. (as of Dec. 31, 2009)(1): c. 2,2004Total 2009 sales to U.S.(1) customers: c. $700 M

Safran (Morpho)L-1

Security business: a global geographic fit

Represents Major R&D / Production Facilities

4Total Employees worldwide (as of Dec. 31, 2009)(1): c. 6,900

4Total 2009 revenue worldwide (1) : c. € 1.35 Bn

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A complementary technology approach

L-1 adds a suite of best of breed technologies that would enhance Safran’s (Morpho) own technology and product offering across a broad range of IDmanagement and Homeland Security applications

Main owned technologies

Ø AFIS software •Ø Secured printing •Ø Smart cards •Ø Explosive detection •

Ø Multimodal biometric platform •Ø Iris recognition •Ø Facial recognition •Ø Livescan and multi-biometric acquisition devices •

This will create a pool of technologies to enhance further security for state and local governments, aviation and other critical infrastructure

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Yielding significant operating synergies

Value creation drivers

Operating synergies

Cost synergies at different levels:Rationalisation of sitesInternational salesR&DOther support and operations

Safran will obtain hardware / software internally (rather than from 3rd parties) for Biometric equipment and blank documents for Secure Credentialing

Run-rate synergies expected to be fully

realized within 18 months from the

effective closing of the transaction

Approximately $30 M run-rate and not including likely top-line commercial synergies

Estimatedimpact ($M)

Sourcing synergies

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Part 4Conclusion

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Conclusion

Enhanced leadership in biometrics and identity management solutions

Highly complementary combination in a high prospects field

All-cash offer fully financed and accretive from year one

Executing strategy and delivering value

Enables Safran swiftly to reach its 20% revenue target for its security business

Strengthens Safran’s third pillar: security

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Next Steps

Timing to closing will largely be driven by U.S. regulatory processes

Ø Filing of preliminary proxy materials

Ø SEC review process

Ø L-1’s shareholder meeting to approve transaction

Ø U.S. Antitrust / Hart-Scott-Rodino (HSR)

Ø Committee on Foreign Investment in the United States (CFIUS) review

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Questions & Answers

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Forward-looking statements disclosure

These documents contain forward-looking statements. All statements other than statements of historical fact in in this presentation, including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations, are forward-looking statements. These forward looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements, or industry results, to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we expect to operate in the future. Important factors that could cause our actual results, performance or achievements to differ materially from those in the forward-looking statements include, among other factors:Ø the cyclical nature of the businesses;Ø the effects of exceptional and unpredictable events;Ø the impact of competition and regulations;Ø fluctuations in exchange rates;Ø our ability to maintain high levels of technology.

Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release any update or revisions to any forward-looking statements in this presentation as a result of any change in our expectations or any change in events, conditions or circumstances on which these forward-looking statements are based.

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Appendix

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L-1 secure credentialing solutions

Secure end-to-end processes and advanced technologies used by thousands of government customers worldwide to produce the most secure identity documents possibleØ Driver’s Licenses, Enhanced Driver’s Licenses (EDLs)Ø Passports, U.S. Passport Cards, Border Crossing CardsØ Voter Registration, National, Universal/Unique and WHTI Compliant Tribal ID Cards

Expertise through the entire identity lifecycleØ Secure front and back office processesØ Remote servicesØ Self-service kiosksØ Biometric recognition softwareØ Automated knowledge and road skills testingØ Secure production systemsØ Documents authentication

Produced over two billion secure credentials to-dateØ 85 million driver’s licenses annually

Incumbent on key U.S. Federal identity programs Passports, IDs

Kiosks

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L-1 biometric & enterprise access solutions

L-1’s biometric solutions capture, manage and move biometric data for accurate and rapid identification and tracking of persons of interest

Solutions combine industry-leading ABIS® software with advanced biometric readers, capture and authentication devices, access control unitsØ Mobile identification devices (HIIDE, PIER, IBIS)Ø Access control systemsØ Iris recognition systemsØ Finger / full hand solutions (single, dual and tenprint fingers; palm, full hand)Ø Face solutionsØ Multi-biometric stations

Playing an integral role in the world’s largest identity-related programsØ Search and match capabilities for the DoD Automated Biometric Identification System (ABIS)Ø State Department Visa issuance program - 85 million record databaseØ More than 13,000 mobile devices fielded in areas of conflictØ De-duplication of >80 million records in the world’s largest biometric and demographic de-duplication

exercise - India

HIIDE

PIER

3D Face Reader

IBIS

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L-1 enrollment services

Enrollment services capture and submit biometric data and other information required for processing civilian applications for government-issued ID cards, Visas and Passports, permits and other entitlement benefitsØ Approximately 6 million people processed to date; 2 million annuallyØ Largest network in the U.S. and Canada with more than 1,000 locations

Complete outsourced solutionØ Secure self-service Web portalØ Customized data collection and enrollmentØ Convenient locations near applicant populationsØ Direct electronic channeling and responseØ Integration with employee records

Wide range of customersØ More than 5,000 educational institutions and charitable / volunteer organizationsØ Nurses, doctors, home health care and nursing facility workersØ Commercial drivers / TSA HAZPrint endorsement; Maritime workers / cardsØ Regulated industries such as national banks, brokerage firms and financial institutionsØ Government humanitarian, health and welfare program enrollment

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RENEWAL

UNTIL

2040Nacelles

July 2008

RichardNixon

Georges Pompidou

CFM56

Safran / GE partnership renewed until 2040

Next generation engines (LEAP-X)

June 1973

CFM56

Services

CFM InternationalCFM56, the best selling civil engine ever

Extension of Safran / GE partnership to 2040Expansion of cooperation to related engine servicesAdvancement of Technology & Environment : commitment to offer -16% fuel burnt by 2016

A new milestone in the CFM success story

Expanding the Safran / GE partnership in Equipment50-50 JV for nacelles and thrust reversersCreate large pool of engineering and industrial resourcesDevelop innovative market leading technologies