Published December 06, 2012
FRANKFURT – German carmarker Daimler raised over $2 billion from a lightning sale of shares in Airbus parent EADS on Thursday, making it the first beneficiary of a shake-up of the European aerospace company that sent EADS shares higher.
Daimler's sale of a 7.5 percent stake is the first step in a complex series of transactions designed to reduce the scope for government interference in Europe's largest aerospace group following a deal between politicians, banks and industrialists.
The deal led by France, Germany and Spain calls for governments and proxies to reduce a block of shareholdings in EADS to 30 percent from 50 percent, while removing a boardroom veto over industrial matters previously enjoyed by France.
Daimler said it had netted 1.66 billion euros ($2.2 billion) from selling a 7.5 percent stake in EADS.
EADS shares gained as much as 9 percent to 29.6 euros, recovering their value before the announcement in September of negotiations to merge with BAE Systems.
Although the $45 billion merger attempt failed, due in particular to opposition from Germany, many of the structures designed for the tie-up have been adopted, handing full day-to-day control to Chief Executive Tom Enders.
"The primary purpose of the changes to the EADS shareholder pact is a move towards normalizing the governance structure," said RBC Capital Markets analyst Rob Stallard.
EADS shares were also buoyed by its plans to buy back up to 15 percent of the stock to mop up excess shares and facilitate the exit of Daimler's fellow core industrial shareholder, French media company Lagardere.
The shake-up will see France and Germany holding stakes of 12 percent each and Spain on 4 percent. Senior partners France and Germany will have two non-civil servant representatives each on the board, but will only have the power to veto a list nominated by management from which the names will be drawn.
France had previously held a veto over appointments and other matters and sources close to the talks said Germany had hoped to duplicate these, but the powers were scrapped.
However, analysts say France and Germany will continue to exert indirect influence as major defense customers.
EADS has been eager to reduce state interference, fearing it might deter orders from other countries.
The changes are subject to a full extraordinary shareholder meeting in the first quarter, most likely early March.
In a placement that was several times oversubscribed, Daimler sold 61.1 million shares in EADS for 27.23 euros each, Wednesday's closing price and the top end of the expected range. It maintains 7.5 percent of EADS for the time being, matching a stake held by Lagardere, but both will be free to exit in 2013.
Daimler aims to focus on its core business at a time when it has become a distant third in the global luxury car market.
"We will invest the proceeds of the sale into the global growth of our divisions, our products and the extension of our technological leadership," Daimler finance chief Bodo Uebber and former EADS chairman said, confirming the company would not return the cash to shareholders.
The maker of Mercedes-Benz cars is struggling to turn around its fortunes, announcing plans to cut costs by 2 billion euros after it warned in October it would miss its earnings forecast this year and shelved its 2013 margin targets.
Daimler said it aimed to reduce its remaining 7.5 percent stake in EADS, but would not sell any more shares for a period of six months.
(Additional reporting by Markus Wacket, Tim Hepher, Jean-Baptiste Vey, Cyril Altmeyer; Editing by Mark Potter)