* Jean-Bernard Levy to become CEO of French arms firm
* Levy left Vivendi in June in strategy dispute
* Dassault chief dismisses grand French defence merger
* Thales shares fall amid investor nerves over switch
By Cyril Altmeyer and Tim Hepher
ISTRES, France/PARIS, Dec 19 Jean-Bernard Levy
emerged on Wednesday as the next chief executive of French arms
firm Thales, months after a strategy dispute cost him
his job as head of media and telecoms group Vivendi.
It is the second shake-up in the French defence industry in
as many days, after the nomination of a new leader of key Thales
shareholder Dassault Aviation, and ends an unhappy three-year
reign for Luc Vigneron whose hiring and firing won him enemies.
On Tuesday, Dassault said Eric Trappier, the head
of its international operations, would take over as CEO when
Edelstenne reaches retirement age in January.
Despite outward appearances of a changing of the guard, both
moves underscore the enduring influence of outgoing Dassault CEO
Charles Edelstenne and could take the edge off speculation of a
sudden wave of French defence mergers, industry sources said.
"Charles Edelstenne chose his own successor and then
anointed the new head of Thales before stepping down. It
demonstrates one thing, that Edelstenne is stronger than ever,"
said a French industry source, asking not to be named.
Edelstenne, who opposes talk of a "France Aerospace"
conglomerate including Thales, announced Levy's appointment to
reporters at a drone demonstration in southern France without
waiting for a Thales board meeting due on Thursday.
Levy stepped down in June as CEO of "World of Warcraft"
video game maker Vivendi over a strategy dispute with the French
company's supervisory board.
Edelstenne said the 57-year-old telecoms engineer's first
task would be to restore calm to Thales after months of conflict
at the maker of warplane parts and air traffic systems.
Only then would Dassault assess the future of Thales
together with the French government, which co-operates with
Dassault in a shareholder pact.
"It is necessary that he brings calm back into the company
and then that he starts working," Edelstenne said.
The French state and Dassault Aviation own 27 and 26 percent
of Thales respectively.
"FORGET" GRAND DEFENCE MERGER
Vigneron faced attacks on his management and had struggled
with the unions after an executive reshuffle in July.
His successor, who went to high school with French President
Francois Hollande just outside Paris, is a former aide to
conservative politician Gerard Longuet but has managed to avoid
being labeled as a member of one political camp or the other.
Levy graduated from France's top engineering school with a
bias towards telecoms, but developed and maintained connections
in defence after working for the space affiliate of Matra, the
missile maker owned by Lagardere that later went on to
found Airbus parent EADS.
At Vivendi, he gained experience in deal-making by helping
sell assets to reduce debt and buy telecom units in Brazil and
Morocco to fuel its subsequent overseas expansion.
But Edelstenne sought to pre-empt any speculation that Levy
would plunge into a grand merger of French aerospace and defence
companies, something the industry has chatted about for months.
Laurent Dassault, a member of the family that controls the
business-to-combat jet maker, was quoted in October as saying he
supported a tie-up between French companies Dassault, Thales,
Safran and Zodiac Aerospace.
Without referring specifically to these remarks, Edelstenne
told reporters: "I know this idea has come from somewhere. I
have a piece of advice for you: Forget it." The 74-year-old will
remain on the Dassault board after stepping down in January.
Industry sources suggest Dassault opposes Thales merging
with the larger Safran unless it can play the controlling role.
The changes also leave questions over a tie-up between
Thales and French state arms firm Nexter, which Vigneron backed.
Thales shares fell 2.4 percent amid uncertainty over the
company's direction under the new leadership.
"Investors may worry that Vigneron is going because
something has gone wrong which we have not yet heard about,"
said UK-based Agency Partners analyst Nick Cunningham.
"I suspect it is more of a stab-in-the-back but the fall in
the stock may reflect that concern," he said, adding that to
outside investors the unpredictable ups and downs of French
defence leaders sometimes resembled the "lives of the Borgias".
Another defence analyst, who asked not to be identified,
said that after a slow start, Vigneron was beginning to win over
investors. Thales shares have risen 15 percent this year.
Shares in state-controlled aerospace group Safran, many of
whose independent shareholders are, according to analysts,
skeptical over a merger with Thales, closed up 0.7 percent.