Qatar In Talks With EADS To Buy Stake

March 12, 2007

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The Gulf state of Qatar on Monday affirmed its interest in taking a stake of up to 10 percent in European aerospace group EADS, which is suffering from problems at its Airbus unit.

The remark by Qatar's foreign minister helped pull the shares of EADS off four-month lows following a big drop in 2006 profits on Friday as the group took a EUR2.5 billion euro (USD$3.28 billion) charge for delivery problems for the A380 superjumbo.

Qatari Foreign Minister Sheikh Hamad bin Jasim al-Thani said in London the idea of acquiring a 10 percent stake was "still in the very early stages".

"First of all we need to see the right conditions at the right price," said the minister, who is also head of state controlled Qatar Investment Authority.

He said he wanted to know more about EADS' plans before making a purchase. He did not give details.

An EADS spokesman said talks with investors and potential investors were confidential.

The QIA already has an indirect stake in EADS through a share holding in French media group Lagardere, which was one of EADS founding shareholders with a stake of 15 percent that it is in the process of reducing to 7.5 percent.

"We own over 7 percent of (Lagardere)," Sheikh Hamad said.

That makes the QIA the third largest shareholder in Lagardere, and marks a one percent increase in its ownership stake since June 2006.

The troubles at Airbus have led to speculation EADS will have to seek fresh capital, potentially allowing in new investors such as Qatar or Dubai or allowing Russia's VTB Bank to increase its existing 5 percent stake.

Lagardere Chief Executive Arnaud Lagardere, who is EADS co-chairman, told analysts at a conference on his firm's results on Monday that there was no need for a capital increase at the moment, pointing to cash EADS still has on its balance sheet.

He also dismissed calls from French politicians to renegotiate the core shareholder pact that groups Lagardere and the French state on one side and German interests, represented by car maker DaimlerChrysler, on the other.

He said after the meeting there was no need to change the shareholder pact to accommodate Qatar, but signaled any investment would be welcomed - echoing sentiments voiced already by France's trade minister.

"The Qataris are friends, EADS' friends and very big customers. All shareholders are welcome," Lagardere said.

French politicians of all parties have signaled their willingness to support any capital increase at EADS if needed - a position reiterated on Monday by Nicolas Sarkozy, the candidate of the ruling conservatives for France's presidential elections in April and May.

"I will do with Airbus what I did with Alstom," Sarkozy told Airbus staff at the northwestern town of Meaulte where Airbus has a site which could be closed or sold.

When Sarkozy was finance minister, the French state backed a successful bail-out of engineering group Alstom by taking a minority stake, later sold to Bouygues at a profit.