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June 2006 |
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EADS SHAREHOLDERS GO FOR CASHBy Volker K. ThomallaThe two principal shareholders of the biggest aerospace concern in Europe, EADS, are both disposing of 7.5 percent of the total EADS equity. Once the transactions are complete, DaimlerChrysler of Germany and Lagardère SCA of France will each hold only 22.5 percent of the shares. The two sales have been closely coordinated and will comply with the framework conditions that were agreed between the shareholders when the company was founded six years ago. This means that after the sale, the German and French proprietors will continue to have identical holdings in the second biggest aerospace company in the world. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler, dismissed concerns that his company would withdraw entirely from EADS. At the DaimlerChrysler annual general meeting he stated surprisingly clearly that the company intended to retain at least a 15 percent share in EADS in the long-term. DaimlerChrysler and Lagardère SCA are adeptly taking advantage of the current all-time high of the EADS share price to reduce their stakes. After all, as of the beginning of April the share price stood at €35 Euros. The French media group can use the proceeds to finance its planned international expansion, while DaimlerChrysler will use its windfall to good effect as a means of financing the restructuring of its struggling automotive division. But the two EADS shareholders are not the only ones seeking to cash in their shares at a time when things are looking up in the aerospace industry. BAE Systems is also rationalising its shareholdings. Tom Enders, chairman and CEO of EADS, described BAE Systems' decision to pull out of Airbus as “strategically foreseeable, but tactically surprising”. At present 80 percent of shares in the European aircraft manufacturer are owned by EADS and the remaining 20 percent by BAE Systems. The British announced in the first week of April that they want to dispose of their Airbus shares. As EADS has the right of first refusal, which it plans to exercise, Airbus will become a 100 percent subsidiary of EADS later this year. For BAE Systems, this is the ideal time to be selling. The company needs money to finance its ambitious growth and acquisition plans in the defence business. As Airbus is producing comfortable profits, the price at which BAE's shares sell will be correspondingly high. Since EADS has a well filled war chest with liquid assets to the tune of €5.5 billion Euros, it will be in a position to pay a good price even if this is less than BAE Systems would like. It seems that the announced sales will not actually have much of an impact on the structure of the aerospace industry in Europe. The sale of the BAE shares will have little effect on Airbus, as an integrated, supranational company. And the fact that a larger proportion of its shares are scattered holdings could actually be a good thing as far as EADS is concerned. The shareholders have simply taken advantage of a propitious moment to fill their coffers. This will put them in a good position for future, larger structural changes in the global aerospace industry. From page 4 of FLUG REVUE 6/2006
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