Shareholders haggle over final details of EADS shake up
Shareholders in EADS pored over a handful of clauses in the closing stages on Tuesday of talks to shake up the European aerospace group, people familiar with the discussions said.
Meetings in Paris focused on industrial and banking transactions needed to let the German government to take a direct stake in the parent company of Airbus for the first time. Barring surprises the main lines of political agreement appeared to have been decided.
EADS shares rose up to 3 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 and German carmaker Daimler - 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 on that.
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.
Bloomberg said the buyback could be worth 3 billion euros.
EXITING THE MAZE
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 a 3-percent bloc 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 Dedalus 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.
The complex arrangements leave a total overhang of 18 percent of EADS waiting to be sold by Daimler and Lagardere to complete their exit, but sources disagreed on the timing.
Most observers believe the bulk of the shares would be sold progressively to avoid depressing the price. The most immediate pressure concerns three percent held by Daimler to preserve Franco-German parity during a transitional phase.
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 likely come this week. But regulators were on stand-by for an announcement by Wednesday.
Talks to overhaul EADS accelerated after recent negotiations to merge the company with BAE Systems fell apart.
The new arrangement inherits some of the structures devised for that 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 the new leaner structure.
EADS Chief Executive Tom Enders ruled out a new BAE bid 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 fivefold, 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. [ID:nL5E8N3FN0] Deliveries also surged to 516 for the year to date but Airbus is expected to lose ground to Boeing this year.
(Additional reporting by Gernot Heller and Tim Hepher; Editing by Alastair Macdonald)