BAE Systems is planning to sell Airbus stake to EADS

BAE Systems is planning to sell Airbus stake to EADS

	Published : Fri, 07 Apr 2006 10:35 By : Richard Owen Print this Story

LONDON: British defence firm BAE Systems Plc. is all set to sell its 20 per cent stake in European aircraft maker Airbus, according to a news report Thursday. The company will sell the holding to European aerospace company EADS, which owns the rest of Airbus, for around 3 billion pounds, according to the report. The company, however, refused to comment on the report.

The news report, published by BBC, said BAE Systems wants to end the 27-year-old relationship as it finds the time suitable to sell the stake and invest the proceeds in its U.S. businesses, mostly defence-related. However, in March the company had denied another newspaper report that it is selling the stake to buy U.S. defence company L-3 Communications Holdings Inc.

According to the report, the BAE's board had taken the decision and is expected to approach the department of trade and industry. EADS had given a value of 3.5 billion euros for the BAE stake in its annual report, but analysts are of the view that BAE will demand a premium on this value. The defence firm has the option to sell the stake to EADS at open market value either for cash or in exchange for EADS shares. It can seek cash payment in case the share issue involves lengthy regulatory procedures.

The report also said Amicus union has expressed concern over the proposed sale and its leaders are requesting talks with BAE. The sale of stake will end BAE's ownership of Airbus plants in North Wales and the West Country, where over 13,000 people are employed in making plane parts.

BAE is now planning to concentrate on defence-related products. It has bought U.S. firm United Defense in 2005 for 2.1 billion pounds.

According to sources, BAE Systems' chief executive Mike Turner is expected to meet secretary of state for trade and industry Alan Johnson to formally convey the decision of the company's board.

The stake sale comes at a time when Airbus has asserted its superiority in the civil aviation market, overtaking U.S. rival Boeing in terms of orders and deliveries. It has orders in hand for 2,173 jets worth 220 billion pounds, It had sold 1,111 aircraft in 2005. It is also poised to introduce its 555-seater A380 super jumbo.

Airbus became an independent business entity five years ago with both EADS and BAE Systems holding shares in it.

Some time ago, BAE Systems had been in talks with U.S. tank maker General Dynamics for a possible merger, but the deal did not materialise over differences relating to valuations.

EADS is jointly owned by German automaker DaimlerChrysler and French media company Lagardere, along with the French government. Both DaimlerChrysler and Lagardere are divesting 7.5 per cent each in the company for about 2 billion euros. After this divestment, EADS will be owned 22.5 per cent by DaimlerChrysler, 15 per cent by the French government, 7.5 per cent by Lagardere and 5.5 per cent by the Spanish state holding company.