Airbus parent European Aeronautic Defense and Space Co. N.V. Or EADS (EADSY), which is priming for a possible 30 billion pound or $49 billion merger with British defense contractor BAE Systems plc (BA.L, BAESY.PK), is making political concessions to pave the way for the potential merger with BAE, according to a report in the Financial Times Deutschland on Sunday.
EADS confirmed last week it is in talks for a possible merger with BAE that envisages a 60 percent ownership for EADS in the combined entity, with the remaining stake being held by BAE Systems.
The merger will create an industry giant that will surpass rival Boeing Co. (BA) in terms of sales. The potential combination will have a dual listed structure, under which both companies would operate as one group, while being listed on their respective exchanges.
The French and German governments each have a 22.5 percent shareholding in EADS, while a merger with BAE would reportedly reduce that stake to 9 percent each. French media group Lagardere SCA (LGDDF.PK) and German automotive major Daimler AG (DDAIF.PK) also hold stakes in EADS.
EADS and BAE are currently in talks with various federal governments for political approvals for the merger, with special issue of shares for them being offered along with job guarantees.
The issue of golden shares of EADS and BAE to the British, French and German governments will provide them the power to veto any future hostile takeover of the merged entity. It will also prevent a single shareholder, whether private or public, to hold more than 15 percent of merged group. Germany never had direct veto or voting rights in EADS until now.
A possible merger will help EADS to tide over weakness impacting the civil aircraft sector by latching on to the defense sphere, where BAE Systems focuses. A merger will also resuscitate plans for a pan European aerospace business. The two companies are already partners in programs including Eurofighter and the missile systems venture MBDA.
The potential combination will also catapult the two companies ahead of Boeing in terms of sales. On a combined basis, EADS and BAE Systems would have sales of about 72 billion euros or $93 billion, based on 2011 results. Boeing had reported revenues of $68.7 billion last year.
EADS was formed in 2000 by the merger of Aérospatiale-Matra, DaimlerChrysler Aerospace AG of Germany, or DASA, and Construcciones Aeronáuticas SA of Spain. Meanwhile, BAE was formed in 1999 when British Aerospace Plc, which had been exploring a merger with DASA, instead chose an all-U.K. combination.
In Paris, shares of EADS closed Friday at 25.31 euros, up 0.16 euros or 0.64% on a volume of 11.98 million shares.
In London, shares of BA.L closed at 347.00 pence, up 9.90 pence or 2.94% on a volume of 26.45 million shares.
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by RTT Staff Writer
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