BAE moves to sell stake in Airbus worth more than €4bn

Sat, Apr 8, 2006, 01:00

Europe's largest defence firm, BAE Systems, wants to sell its 20 per cent stake in aircraft maker Airbus to EADS, in a deal which could give it at least €4 billion for acquisitions in the United States.

"Discussions are at an early stage and a further announcement will be made if and when appropriate," BAE said in a statement to the London Stock Exchange.

BAE has an option to sell its stake in Airbus to EADS, the Franco-German-Spanish firm which owns the remaining 80 per cent.

Airbus is the world's biggest aircraft maker, outselling US arch-rival Boeing, and set to begin deliveries of the mammoth 555-seat A380 double-decker late this year.

"We believe that now is the right time for us to divest our Airbus shareholding to allow us to concentrate on our core transatlantic defence and aerospace strategy," BAE chief executive Mike Turner said.

The stake is valued at €3.5 billion in EADS's books but analysts expect any sale to be worth £3-£4.5 billion (€4.3-€6.5 billion), buoyed in part by the currently high level of EADS and BAE share prices.

Sector analysts have said BAE was expected to sell its stake in Airbus at some stage, most likely spending the proceeds of the sale in the US defence sector. "Disposal of Airbus [ and BAE's remaining European interests] could clear the way for a major US merger," Numis Securities analyst Andrew Gollan said in a research note.

BAE in recent years has focused much of its growth on the US defence market, by far the world's largest.

It paid about $4 billion for Bradley fighting vehicle maker United Defense Industries in a move which underscored the importance of the US market to BAE's future.

Media speculation about a pending bid by BAE for US defence firm L-3 Communications, however, was unfounded, a BAE spokeswoman said.

"We can state that L-3 is not a target for BAE Systems," she said.

The potential Airbus stake sale drew swift opposition from one of Britain's largest unions over concerns about keeping Airbus's wing-making technology as well as 13,000 Airbus jobs in the UK.

"The government should step in and block this sale," John Wilson, a representative for the GMB union said in a statement.

BAE, EADS and Airbus said those fears were without basis.

An Airbus spokeswoman stressed that its UK facilities are already owned by Airbus, not BAE: "We are fully committed to the UK and to Airbus's highly skilled employees." Prime minister Tony Blair's office declined to comment.

BAE's Turner met British Trade and Industry Secretary Alan Johnson to discuss the matter yesterday.

"This meeting was constructive and further discussions will take place with the parties involved," the department of trade and industry said in a statement. The UK has invested more than £1.2 billion in Airbus over the past 20 years.