BAE Systems ponders sale of its Airbus stake

7th April 2006, Comments 0 comments

LONDON, April 7, 2006 (AFP) - British defence and aerospace giant BAE Systems said on Friday it was discussing the sale of its 20-percent interest in aircraft maker Airbus to its French-German partner EADS.

LONDON, April 7, 2006 (AFP) - British defence and aerospace giant BAE Systems said on Friday it was discussing the sale of its 20-percent interest in aircraft maker Airbus to its French-German partner EADS.

Analysts estimated that BAE could raise US $4.9-7.9 billion (EUR 4-6.5 billion) from the sale.

A decision by BAE to leave the Airbus consortium could add to competition between European and US aerospace industries. BAE has been involved with Airbus since 1978.

France has led the way in trying to consolidate aerospace and defence industries around French and, if possible European groups.

But last week France itself approved an alliance with US interests by allowing a deal between Alcatel and US telecommunications equipment group Lucent. However, Lucent is the smaller of the two in that tie-up.

The BAE announcement is a third upheaval for EADS this week. On Wednesday it was left out, at least for now, of a venture consolidating French space technology industries through an alliance between Alcatel and Thales.

EADS had been expected to participate, extending the new alliance to Germany and other European interests.

At the same time, two of the main shareholders in EADS, DaimlerChrysler autos and Lagardère publishing, said that they would reduce their holdings.

BAE chief executive Mike Turner said: "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."

The company said that talks were at an early stage, adding that "there are no implications for jobs arising from this announcement".

The news, first reported by the BBC late on Thursday, prompted union leaders to seek urgent talks with BAE because Airbus employs about 13,000 people in Britain.

However, a Paris-based spokesperson for Airbus told AFP: "We are totally committed to Britain and with respect to the British employees... Airbus will remain in Britain for the long term."

The sale would hand EADS full control of Airbus and would bring an end to British ownership of manufacturing sites in Broughton, north Wales and in Filton, near Bristol, western England.

EADS, the European Aeronautic Defence and Space Company, which has an 80-percent stake in Airbus, is Europe's leading aeronautic industrial group.

Broker Merrill Lynch said it believed the value of the BAE stake was between 2.8 and 3.3 billion pounds (EUR 4-4.7 billion, US $4.9-5.7 billion) and said it expected the company to use the cash to fund US acquisitions.

In March 2005, BAE Systems acquired United Defense Industries, the US maker of Bradley armoured personnel carriers, for US $3.97 billion.

Last June, BAE won orders worth US $1.13 billion from the US Army to re-manufacture and upgrade more than 500 Bradley combat vehicles, of major importance during US operations in Iraq.

However the group recently denied reports that it wanted to purchase US defence electronics specialist L3 Communications.

BAE Systems, which has major operations across five continents employing 90,000 people, had until now maintained it had no interest in selling its stake in Airbus, which manufactures civil aircraft but seeks expansion into the defence sector.

EADS recently valued the BAE stake in Airbus at EUR 3.5 billion (US $4.3 billion). But investment bank Goldman Sachs has said BAE could refuse to sell its share for anything less than EUR 6.5 billion.

London's Times newspaper argued on Friday that the sale could prove embarrassing for the British government, which has committed hundreds of millions of pounds to Airbus.

Britain has had a long association with Airbus which was formerly set up as Airbus Industrie then in 1970. BAE purchased its 20-percent stake back in 1978.

The first Airbus, the A300, began service in 1974 but it was not until the arrival of the A320 in the early 1980s that the Toulouse-based company started to really compete with its US rival Boeing.

Airbus made aviation history in April last year with a successful test flight of the world's biggest commercial aircraft, the A380. The 555-seater superjumbo is due to come into service later this year.

Airbus booked record firm orders exceeding 1,000 passenger planes in 2005, taking 51.0 percent of the world market and beating arch-rival Boeing for the fifth year running.

Copyright AFP

Subject: French news

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