Daimler begins sale of its 7.5 percent stake in EADS
German carmaker Daimler began selling its remaining stake in Airbus owner EADS on Tuesday as part of a wider overhaul of the European aerospace group's core ownership nearly 13 years after its creation.
Daimler said on Tuesday that it received a waiver from a six-month lock-up period and would immediately begin placing with investors 61.1 million shares, equivalent to a 7.5 percent stake in Toulouse-based EADS.
"It comes as a bit of a surprise, since expectations were centered around a sale in either the third or fourth quarter, but given the recent volatility in global equity markets, it's tactically a smart move," JP Morgan analyst Jose Asumendi said.
German analyst and investor sentiment fell sharply in April, a key confidence indicator showed on Tuesday, hit by fears that the Cyprus debt standoff and weakening growth in China could take a heavy toll on Germany, Europe's biggest economy.
Chief Financial Officer Bodo Uebber said in a statement that Daimler's exit from EADS would allow the company to focus solely on its core automotive business: "We will invest the proceeds of the sale in the global growth of our divisions and the extension of our technological leadership."
Daimler's move follows on the heels of fellow founding shareholder Lagardere's exit from EADS last week with the sale of a matching stake, paving the way for the aerospace group to have a larger free-market float.
The pricing of the offer of Daimler's shares in EADS is expected to take place on Wednesday. Based on the closing price of 37.19 euros, the stake is worth between 2.2 to 2.3 billion euros ($2.89-$3.02 billion).
A source close to the deal said the shares were being priced at between 36.20 and 37 euros each, about 2 percent lower on average than the 37.35 euros at which Lagardere sold its holding.
Daimler declined to elaborate on the pricing of the offering, but a statement on Tuesday revealed that it stands to gain from a potential rise in EADS shares even after the placement.
"Daimler has entered into cash-settled contracts with both Goldman Sachs and Morgan Stanley which will allow a certain upside participation in the stock prior to year end," Daimler said.
The carmaker also said that EADS intends to buy 600 million euros worth of its own shares as part of the placement, subject to allocation.
Analysts noted that Daimler's proceeds from the EADS stake sale are big enough to fund a dividend similar to that distributed earlier this month, which at 2.20 euros each equated to 2.3 billion euros.
"The sale helps sustain confidence in the dividend policy for 2013, and quite a few investors in Daimler buy the share because of their more generous payouts," JP Morgan's Asumendi said.
Goldman Sachs and Morgan Stanley , the joint book runners for the offering, are also serving as counterparties to Daimler in a separate but related transaction.
The two banks will place an order for up to 8 million shares to hedge the cash-settled contracts entered into with Daimler.
($1=0.7616 euros)
(Reporting by Christiaan Hetzner in Frankfurt; Additional reporting by Edward Taylor in Frankfurt and Kylie MacLellan in London; Editing by Greg Mahlich and Leslie Adler)