Shareholders haggle over final details of EADS shake up

LONDON Tue Dec 4, 2012 6:31pm IST

Visitors talk near the welcome desk of the EADS booth at the ILA Berlin Air Show in Selchow near Schoenefeld south of Berlin on September 13, 2012. REUTERS/Tobias Schwarz

Visitors talk near the welcome desk of the EADS booth at the ILA Berlin Air Show in Selchow near Schoenefeld south of Berlin on September 13, 2012.

Credit: Reuters/Tobias Schwarz

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LONDON (Reuters) - Bankers, civil servants and industrialists were squeezing out final concessions in talks to shake up aerospace group EADS on Tuesday, people familiar with the discussions said.

Attention focused on transactions needed to allow the Berlin government to take a stake in the Airbus parent, which are especially complex between German partners. But barring surprise changes, the main political lines appeared to have been decided.

EADS shares EAD.PA rose over two percent for a second day on hopes of a simpler structure for Europe's largest aerospace group, which has been controlled by a maze of French and German public and private interests since it was created in 2000.

"The negotiations about a new shareholder structure are making good progress," a spokesman for Germany's economics ministry said.

"But there are still important details open, so the participants are still aiming to find a solution as soon as possible."

The deal is expected to bring Germany on board as a direct shareholder for the first time, while allowing proxy industrial shareholders -- French media firm Lagardere (LAGA.PA) and Germany carmaker Daimler (DAIGn.DE) -- to sell their stakes.

Analysts say that although state shareholdings will rise as Germany takes a seat alongside France and Spain, the risk of meddling will be reduced as industrial proxy shareholders in France and Germany withdraw and state veto powers are curbed.

With 8 billion euros of net cash on its balance sheet, the company is poised to launch a share buyback if needed to prop up share prices as industrial partners exit, but a source close to the talks said no decision had yet been taken.

Such a buyback, which would be offered to all shareholders, would if necessary be "heftier" than a mere mopping-up operation, he told Reuters, asking not to be named.

France and Germany will be equal in terms of voting rights at 12 percent each with Spain on 4 percent, leaving a cordon of state shareholdings below 30 percent and allowing the market float to rise from 49.5 percent to more than 70 percent.

France owns 15 percent but is set to place 3 percent of this in a non-voting Dutch foundation. Spain owns 5.5 percent.

On the industrial side, Daimler owns 15 percent but exercises votes for 22.5 percent, and Lagardere has 7.5 percent.

The expected deal calls for Germany to build its 12 percent stake in two stages, first by buying out a consortium set up in 2006 to allow Daimler to reduce its stake while keeping control of the votes. It would buy 4.5 percent from Daimler itself.

Unraveling the 7.5-percent Daedalus consortium of private and public banks is seen as a tough part of the exercise, as is defining the precise exit conditions for Daimler and Lagardere.

After plans for announcements on Friday and Monday were postponed, a source briefed on the talks was cautious on the timing of a deal, saying it would most likely come this week.

Talks to overhaul EADS accelerated after talks to merge the company with BAE Systems (BAES.L) fell apart in September.

The new arrangement inherits some of the structures devised for the merger but without BAE -- fixed blocks of minority state shareholdings marked by few special shareholder privileges for governments beyond a set of Special Security Agreements.

Officials have ruled out a repeat of the merger attempt, at least in the near term, with Germany's political objections to the shift of focus away from Europe's centre seen still intact.

EADS has signaled a greater focus on its business from Airbus jets to Ariane rockets and civil and military helicopters while adapting to a new leaner structure.

EADS Chief Executive Tom Enders ruled out a new BAE attempt at a closed meeting of analysts on Monday, according to notes published after the first day of an annual investor forum.

"On the subject of another merger proposal, the CEO was clear that no major M&A is on the agenda at this time," wrote RBC Capital Market analyst Rob Stallard.

Investors also welcomed healthy signs from Airbus which has pledged to hike profit margins five-fold to 10 percent by 2015.

Airbus Chief Executive Fabrice Bregier told Reuters on Monday it had sold almost 200 jets in November, lifting its total so far this year to just 4 below a 2012 target of 650. Deliveries also surged to 516 for the year to date but Airbus is expected to lose ground to Boeing this year.

(Additional reporting by Cyril Altmeyer, Gernot Heller, Philipp Halstrick; editing by Anna Willard)

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