EADS Confirms Shareholder Shake-Up Talks

December 3, 2012

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Shares in EADS rose on Monday as European nations moved towards a deal aimed at overhauling a convoluted shareholder structure at Europe's largest aerospace group.

The Airbus parent company said it was in talks on the company's ownership with France, Germany and Spain, confirming press reports.

People familiar with the matter said the talks involved a sweeping re-arrangement of government stakes, coupled with a staged exit of its industrial partners, reducing big shareholder blocks below 30 percent instead of more than 50 percent.

"The company is participating actively in such discussions... with the objective to preserve and enhance... the interests of all stakeholders," EADS said in a statement.

A German economy ministry spokesman added on Monday efforts were being made to reach a deal as quickly as possible.

Shares in the Franco-German-led group rose over 2 percent as investors warmed to the promise of greater clarity over its shareholder structure, even though it may mean an overhang of stock ready to be sold by industrial groups in the short term.

EADS has been controlled by a combination of the French state and industrial partners in France and Germany since it was founded in 2000 as a European counterweight to Boeing.

But the system has come under strain as the core industrial shareholders - German car maker Daimler and French media group Lagardere - pledged to focus on their core activities.

Germany has meanwhile stepped forward to buy some of Daimler's shares in a surprise reversal of a previously non-interventionist policy towards major industries, raising concerns of growing political interference in EADS.

EADS' ownership structure has also become an urgent issue since USD$45 billion merger talks with UK arms firm BAE Systems collapsed in October, exposing the fragility of its existing shareholder structure.

"The BAE discussions caused a lot of movement and demonstrated to people like Lagardere that they could find a way out," said a person familiar with the discussions.

France and Germany are expected to hold 12 percent each in the company, joined by Spain on around 4 percent and keeping the combined voting bloc below a 30 percent legal threshold.

Negotiators are attempting to choreograph a sequence of moves designed to consolidate state shareholdings while letting industrial partners out of EADS without hurting its share price, which has risen 7 percent this year on robust airliner sales.

Germany will build its stake by buying 7.5 percent from a bank consortium, whose shares are under Daimler's voting control, and 4.5 percent from Daimler which will part separately with a further 3 percent, sources close to the talks said.

That will leave Lagardere and Daimler with a further 7.5 percent each left to sell, but cash-rich EADS will announce a share buyback at the next shareholder meeting to help mop up excess stock and defend its share price, the sources said.


French Chairman Arnaud Lagardere is expected to remain in his post until a shareholder meeting in the spring, which is likely to bring in a mainly independent board led by a new chairman, the sources said.

EADS declined to comment.

Germany has not been a direct shareholder before, with 22.5 percent of voting rights instead held by Daimler. On the French side, the state owns 15 percent, with 7.5 percent held by media group Lagardere. Spain owns 5.5 percent.

A German consortium called Dedalus, made up of private financial institutions and public sector owners including state controlled bank KfW, holds a 7.5 percent stake in EADS but the voting rights are part of those controlled by Daimler.

EADS is due to hold an investor meeting on Monday.

"The currently discussed potential changes are likely to require the approval of EADS shareholders and there can be no certainty that these discussions will be conclusive," EADS said.

Under Dutch law that governs EADS, a group of shareholders cannot control more than 30 percent of the votes without triggering a mandatory bid for the whole company.

Reports on Friday said that France and Germany were close to a deal to shake up EADS after France agreed to hive off part of its 15 percent stake to preserve parity with Germany inside a core government shareholder group.

Under this arrangement, France is expected to place 3 percent in a non-voting structure in the Netherlands, where EADS is registered, while keeping economic control of the stock.

A potential mismatch of shareholdings had been a key stumbling block in the talks.

A German newspaper report said talks were also looking at what level of state representation there could be on the company's board, with suggestions of two places each for France and Germany and one for Spain.

The new arrangement is due to be put to shareholders in the spring of 2013, the newspaper said.