Aircraft

DATE:07/06/06

SOURCE:Flight International

BAE exercises put option to open way to sell 20% Airbus stake to EADS

BAE Systems has formally exercised its put option to sell its 20% stake in Airbus to EADS, subject to valuation. The move now leaves the way open to representatives from both companies to negotiate a price for the stake.

The two sides will seek to finalise negotiations "during the coming weeks". The deal will make EADS the sole shareholder of Airbus and completes a process started in April, when BAE announced its intention to sell its share in the European airframer.

The put option obliges EADS to buy the stake in the event of it coming up for sale. However, both sides need to agree on valuation. Estimates range from $3.5 billion to $4.5 billion for the 20% stake. Insiders expect both BAE and Airbus to place a value in the higher end of this margin: the UK-US defence company to is keen to bolster revenues to fund a additional US acquisitions, while the European manufacturer will shore up the value of the Airbus business, its main revenue stream.

However, if BAE and EADS are unable to agree on the terms of the sale, an investment bank
acting as an indepdent arbiter will be appointed to determine the price to be paid by EADS.

EADS says it "retains the right to pay in cash, in shares or in a mixture of both".

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