DaimlerChrysler snubs Thales, EADS merger

4th March 2005, Comments 0 comments

FRANKFURT, March 4 (AFP) - DaimlerChrysler, a major shareholder in the European Aeronautic Defence and Space Company, officially ruled out for the first time Friday the idea of a merger between EADS and the French defence technology group Thales as favoured by France.

FRANKFURT, March 4 (AFP) - DaimlerChrysler, a major shareholder in the European Aeronautic Defence and Space Company, officially ruled out for the first time Friday the idea of a merger between EADS and the French defence technology group Thales as favoured by France.

"There are some areas where EADS and Thales could cooperate. But I don't see any sense in a merger, either from a shareholder's point of view or from a strategic viewpoint," DaimlerChrysler chairman Juergen Schrempp told the Financial Times Deutschland in an interview.

While there was strong resistance generally to such a tie-up in Germany, it was the first time that DaimlerChrysler, which effectively represents German interests in the pan-European aeronautics group, has so forthrightly stated its opposition.

Indeed, Schrempp's firm rejection of a fully fledged merger will be seen as a snub to the French government, which has been pushing for a combination of EADS and Thales to help create a European defence champion capable of taking on US rival Boeing.

The French government has repeatedly made known its desire for a merger. And the French incoming co-chairman of EADS, Noel Forgeard, who takes up the reins alongside his German counterpart Thomas Enders in May, has also expressed support for such a move.

In December, Forgeard boldly claimed that a merger would be "on the agenda for 2005," even before he had taken up his new office.

But he was clearly doing his calculations without DaimlerChrysler, which plays a key role in any tie-up because it holds 30 percent of EADS.

The French group Lagardere and the French state each hold a 15 percent stake, with the remainder traded on the stock exchange.

And the delicate balance of power is a continuing bone of contention between Germany and France.

Germany's primary concern is that if Thales, in which the French state also holds a stake, is merged with EADS, France would gain a bigger weighting in the shareholder structure of any merged group.

Just how jealously each side guards its say in the company was seen late last year as Berlin and Paris set out to find successors to EADS' current co-chairmen Rainer Hertrich and Philippe Camus.

Germany was quick to name Thomas Enders, a close ally of DaimlerChrysler chief Schrempp, as its new representative.

Enders is a former board member of DASA, the German aerospace company and Daimler-Benz unit that merged with French group Matra and Spanish firm CASA to form EADS in 2000.

As for France, it picked Noel Forgeard to succeed Camus. Forgeard, head of EADS's Airbus unit and a close friend of French President Jacques Chirac, made no bones about his ambition to do away with the current two-way leadership structure at EADS and become sole chairman.

In the FT Deutschland interview published Friday, Schrempp said he did not care whether a Frenchman or a German was in the driving seat.

"It is of no importance whether the new boss is French or German. He should be the best we can get," Schrempp said.

But his comments could be interpreted as a challenge to the French assumption that EADS will be headed by a Frenchman if and when the dual leadership is abolished.

The German-US auto maker also intended to hold on to its stake in EADS, even if aerospace is no longer regarded as a core area of business for DaimlerChrysler, Schrempp said.

"If I look at EADS from a shareholder's point view, I see no reason for us to separate. EADS is creating value for this company," he said.

In Paris, EADS shares were up 0.25 percent at EUR 23.83 and Thales was off 0.64 percent at EUR 34.03 in morning trade, while the CAC 40 was 0.22 percent higher at 4,070.12 points.

CA Cheuvreux analysts said they still expected changes to occur in the Thales shareholding structure.

"There are a lot of political angles in this story and this does not change our view that Thales's shareholding structure will evolve one way or the other.

Any weakness can be used as an opportunity," they said.

A Paris-based analyst, however, said speculation about an imminent merger seemed to have faded, noting attention should focus on Thales's fundamentals now with the company scheduled to release full-year results next week.

© AFP

Subject: French News

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