In last week’s issue, we reported that EADS appeared to be edging closer to a dream merger with Thales. However, in an indication of how swiftly the sands of European consolidation can shift, a series of moves over the past week seems to have made that less likely…at least for now.
Firstly, following its merger with US rival Lucent, French telecommunications company Alcatel is to sell its space, transport and security businesses to Thales for €1.7 billion ($2 billion). In return, Alcatel is increasing its stake in Thales from 9.5% to 21.6%, alongside the French government’s 27.1% shareholding and Dassault’s 5%. The rest of the company’s shares are publicly traded.
The French government, ever keen to plant flags on its industrial champions, appears to be happy with the developments; not only does the Lucent merger create a global telecommunications giant, headquartered in France (albeit with a US chief executive), but the Thales move ensures the country holds onto its assets in space and can still choose between two national contractors. A tie-up with EADS would have involved the Franco-German company transferring its space interests into Thales in return for shares. This option now seems highly unlikely.
There have been suggestions that Thales management – led by chief executive Denis Ranque – favoured getting into bed with Alcatel because it makes the company less vulnerable to a takeover by EADS, a move that would see Thales losing its identity within a European aerospace leviathan.
Alcatel’s space businesses are joint ventures with Finmeccanica, and the French telecommunication company’s 67% share in satellite manufacturer Alcatel Alenia Space and 33% stake in satellite services provider Telespazio are being transferred to Thales – creating the first major link between Thales and the Italian combine.
Finmeccanica emerged as a potential rival suitor to EADS for Thales last year, but Ranque probably feels that a closer relationship with the Italian aerospace giant will help protect the defence electronics specialist’s independence, says one source close to EADS. Without ruling out a future deal with EADS, Ranque last week hinted that the space tie-up with Finmeccanica could lead to a deeper relationship with the Italians. Finmeccanica’s chief executive Pier Francesco Guarguaglini added that the move could “create the opportunity for further developments”.
Last week also saw the long-awaited announcement by EADS’s two corporate shareholders, German carmaker DaimlerChrysler and French media group Lagardère, that they were each offloading 7.5% stakes in the company. Although the deal is complicated – involving an exchangeable bond issue which means both owners technically remain owners of the shares until 2009 – it effectively increases the proportion of EADS shares that is freely traded from around a third to just under a half.
DaimlerChrysler and Lagardère had promised for some time that they would begin a managed withdrawal from EADS once the Airbus A380 became “established”, although at precisely what point in the flagship programme’s transition from first flight to regularly carrying passengers was never made clear.
What was certain was that the delicate French and German balance within EADS would be retained. Until now, Lagardère’s 15% stake represented half the French interest in the company; the government will still hold the other 15% DaimlerChrysler, which had 30%, is reducing its stake to 22.5%. Both companies will use the approximately €2 billion raised to develop their core activities – magazines and TV in the case of Lagardère and new car models for DaimlerChrysler – but insist they will remain “core shareholders” in EADS.
However, do not rule out a further retreat, particularly if the French government decides to shrink its 15% share. Despite its fondness for protecting its national assets, it needs cash to fund its expansive welfare state, and a divestment would be likely matched by a further withdrawal by DaimlerChrysler. EADS’s share price – which has rocketed over the past three years as Airbus has overtaken Boeing in airliner orders and deliveries – fell on the announcement of the DaimlerChrysler and Lagardère moves. This is likely to have been due to simple supply and demand – a new issue of shares on the stock market will inevitably depress the value.
But some believe that, after its sterling performance since the turn of the decade, which culminated in the first flight of the A380 and the highest-ever order tally for an airliner manufacturer last year, Airbus’s – and consequently EADS’s – fortunes may have peaked. Airbus faces a long campaign to take its superjumbo into profit, and a recharged Boeing is setting the pace in the mid-size sector with its 787.
Many feel that DaimlerChrysler and Lagardère may be cashing in their chips at the right time. Meanwhile, co-chief executive Noel Forgeard’s dream of absorbing Thales to create a global rival to Boeing may have to wait.
MURDO MORRISON / LONDON
Source: Flight International
