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Aviation History
1986
1986 - 0007.PDF
DEFENCE Westland—brought back from the brink LONDON Much could change in the ten days before Westland share holders meet at an extra ordinary general meeting to cast their votes on whether the company should consum mate its marriage with United Technologies and Fiat, or join up with the rival European consortium. The story has been so con fused and so full of twists and turns that predicting the outcome is perilous. But in the lead-up to two rivals placing their rescue bids before Christmas, exact details of Westland's financial dilemma have become clear. On December 19 Westland reported pre-tax losses of £95-3 million after excep tional payments of £106-6 million had rubbed out a profit of £11 • 3 million for the year ended September 30. The exceptional payments effec tively "clear the deck provided that we get the partnership sewn up", according to a Westland spokesman. Westland revealed details of the proposed £72 • 2 million UTC and Fiat rescue package simultaneously with its finan cial results. A day later the rival European consortium presented an improved £73 • 1 million rescue package of its own. In contrast to Westland's abrupt dismissal of the Euro pean consortium's first pro posal, cast aside by chairman Sir John Cuckney as a "botched-up, last-minute deal", the board met on December 23 to consider the revised European package. It was expected to meet with the European consortium to clarify some details. The European consortium, which comprises Aero spatiale, Agusta, British Aero space, GEC, and MBB, and is organised by Lloyds Mer chant Bank, is offering West- land 3 • 3 million manhours of work over the next five years, compared with "at least 1 million manhours" over three years offered by UTC and Fiat, "independent of market conditions". Aerospatiale and Agusta have together agreed to put an additional l,270,000hr of work with Westland. The UK Ministry of Defence, which, under the leadership of Secre tary of State for Defence Michael Heseltine, has fought a strong and independent campaign to ensure the success of the European solu tion (and split the British Government into the bar gain), has pledged to order an additional six Sea Kings from Westland. The Sea Kings will provide Westland with an extra 300,000hr of work. Under the European proposal Westland will make a net gain in work of 1,550,000 manhours, on top of 350,000 hours of Super Puma subcontract work already pro vided by Aerospatiale. The work is offered as "uncondi tional but subject to sales". The Europeans have con firmed that they intend to take the drastic, but long overdue, step of merging Europe's two anti-tank heli copter programmes, the Agusta A.129 and the PAH-2. This is perhaps the greatest proof of the European in dustry's determination to rationalise itself and to prise Westland away from a closer alliance with Sikorsky. The move to merge the A.129 and PAH-2 is "common sense", says Peter Thomson, a director of Lloyds Merchant Bank. Europe has realised that having two competing anti-tank helicopters in Europe was "absolute non sense", he says. In financial terms the Euro pean bid is an improvement on the UTC/Fiat proposal. The consortium will pump £37 • 1 million into Westland, as opposed to £30 million from UTC and Fiat, for an equivalent 29-9 per cent shareholding. In addition, the Westland bankers are being asked to convert less debt into prefer ence capital (£23 million rather than £28 million) under the European deal. And Westland shareholders are being offered a two-for-five rights issue at 55 pence a share to raise another £13 million. Under a similar UTC/Fiat arrangement, in vestors would be invited to buy at 60 pence a share to raise £14-2 million. UTC has an option to invest an extra £19 million in Westland and raise the UTC/ Fiat shareholding to 35 per cent, without being obliged to take Westland over. The Europeans have offered shareholders warrants to buy more shares at 85 pence, again on a two-for-five basis, at any time over the next decade. This would reduce the con sortium's shareholding from 29-9 per cent down to 21 per cent if the warrants were exercised in full. The UTC/Fiat deal is not yet fully developed, and will be the subject of further nego tiations, says Westland. But it currently centres solely around the Sikorsky UH-60 Black Hawk which, if the deal went through, Westland would "develop, market, and manufacture ... for sale to a significant number of terri tories throughout the world", says Westland. These include the Far East, Africa, and Europe, Westland tells Flight. But the European con sortium members and the UK MoD have already made it clear to Westland that there is no European market for Black Hawk. Significantly, the UTC/ Fiat deal includes no agree ments for Westland to work on other Sikorsky projects, military or civil. But West- US and European offers to Westland Work Money Nat West/Barclays banks convert debts to shares holdings Rights issue to share holders Existing shareholder's stake will be Money from bidding companies USA Guaranteed 1 million manhours over three years, and marketing of Westland products. £28m £14 2m (@ 60p/share) 50-1% £30rrT • A further £19 million can be made available. Europe Non-guaranteed 3 3 million manhours over five years. £23m £13m (@ 55p/share) 63% £37-1m land would be keen to win a stake in other projects should the deal be signed. Involve ment in the US Army's LHX project, for which Sikorsky and Boeing-Vertol are teamed to compete against Bell and McDonnell Douglas Helicop ters, would be one such project. The Europeans, on the other hand, have pinpointed three collaborative projects for the 1990s in which West- land would take part should their deal be accepted. These are the NH.90 medium-size transport helicopter, the joint European anti-tank helicop ter, and Westland's existing project with Agusta on the EH.101. The consortium pre dicts a total military market in Europe for these three types of 1,300. The UTC/Fiat deal received a further blow before Christmas with the revelation that Libya has a 13 per cent in Fiat. Lafico, the Libyan state holding company handling Libya's foreign investments, has two members on the Fiat board. One is part of a five- member executive board running the Italian company. The disclosure was heralded as an advantage point for the Europeans, and is another intriguing embar rassment in the political battle between Michael Heseltine and UK Trade and Industry Secretary Leon Brittan. Heseltine has isolated himself from the British cabi net by canvassing hard for the European bid, while Brittan has toed the party line and insisted that Westland must be allowed to find its own solution to its problems with out Government intervention. Unwittingly, Brittan has found himself allied with Col Gadaffi of Libya. In the meantime, Westland shares resumed trading on the London Stock Exchange on December 19 and leapt up 15 pence to 75 pence. Westland is delighted with the change in fortunes. In two weeks it had been brought back from the brink of bankruptcy—the company admits it was "perilously close"—and taken centre- stage in one of the most heated commercial tug-of-war contests on record. FLIGHT INTERNATIONAL. 4 January 1986
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