Latecoere Shares Rise On Bid Reports

September 27, 2010

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Shares in French fuselage maker Latecoere soared on Monday after US rival Spirit AeroSystems was reported to be lining up a possible bid to buy the ailing Airbus supplier.

Such a move would mark a second attempt by the world's largest aircraft structures supplier to install itself in France after the company, formed from a spin-off of Boeing activities, was discouraged from bidding for two Airbus factories in 2008. Spirit Aerosystems of Wichita, Kansas, and Latecoere were not immediately available for comment.

Latecoere, which makes passenger doors for the Airbus A380 superjumbo and Boeing 787 Dreamliner, has a market value of EUR€64 million (USD$86 million) but net debts of EUR€351 million.

Latecoere has said its liquidity is assured until 2011, but industry analysts say its long-term future could have important implications for outsourcing of future European plane projects.

"Any kind of M&A noise swirling around (Latecoere) is fuelling hopes it can be saved. But this could be short-lived if no formal offer emerges quickly," a Paris-based trader said.

Le Figaro reported at the weekend that Spirit executives had scheduled talks with Latecoere chairman Pierre Gadonneix, a high-profile former French energy and utility chief recently appointed to lead the search for a buyer. Latecoere said last month it did not rule out any consolidation options under its new chairman.


The company has received industrial and financing support in the past from EADS subsidiary Airbus, its largest customer and neighbour in Toulouse, France.

But Airbus signalled on Monday it would not support it indefinitely or prop up Latecoere with EADS capital.

"We consider the supply chain to be very important but we don't want to be the managers of how the chain will be organised between suppliers," an Airbus spokesman said.

"It is not our task to decide how or if they merge, nor is it our aim to become the shareholder of Latecoere."

On Saturday, EADS' marketing and strategy chief Marwan Lahoud told Le Figaro, "we won't buy Latecoere and we won't go further in rescuing it."

Talks between Latecoere and Airbus over a possible deal to buy two French Airbus factories broke down in 2008 amid concerns over Latecoere's balance sheet and wider lack of credit.

Spirit Aerosystems tried to get involved in the same bidding process but was outmanoeuvred in part because of French political concerns over jobs, industry sources said.

Airbus instead decided to spin off the factories into an arms-length subsidiary, Aerolia, and carried out a parallel operation in Germany, creating a company called Premium Aerotec.

EADS does not yet believe the time is right to launch a new effort to sell these companies. Therefore there are said to be limited industrial options for Latecoere other than a deal with Spirit, or privately owned French company Daher-Socata or - according to Le Figaro - Abu Dhabi-based Mubadala Aerospace.

Industry sources said Airbus would not block a move by Spirit, even though the company is close to its rival Boeing. Airbus recently awarded Spirit a key work contract.

"If in the future an efficient company like Spirit wants to invest, it is not crazy to suppose they could come back through Latecoere," an industry source said, asking not to be named.