BAE agrees Airbus sale

7th Sep 2006

The UK defence firm BAE Systems has agreed to sell its 20% stake in Airbus to EADS for around £1.9bn.The company issued a statement which confirms that the board are recommending the sale. If the sale goes through EADS will own Airbus outright.

The statement reads as follows:

“On 2 July 2006, BAE Systems plc (“BAE Systems” or the “Company”) announced that
the price (the “Price”) payable by European Aeronautic Defence and Space Company
EADS N.V. (“EADS”) in relation to the proposed disposal of BAE Systems’ entire
interest in Airbus S.A.S. (“Airbus”) (the “Proposed Disposal”) had been
determined by an independent expert to be e2,750 million (£1,903 million (1)).

“On 5 July 2006, the Company announced its intention, in accordance with Clause
10.6 of the Shareholders’ Agreement between BAE Systems, EADS and Airbus, to
undertake an audit of the Airbus Group (the “Audit”).



“Today the Board of BAE Systems (the “Board”) announces that it considers that
the Proposed Disposal is in the best interests of the Company and its
shareholders as a whole.


“Having assessed the results of the Audit, the Board believes that Airbus is
facing a challenging short to medium-term outlook, in particular with respect to
certain of its principal programmes.  The Board believes that a significant
amount of management focus, time and investment will be required to address the
issues currently facing Airbus to improve its operating and financial
performance and thereby to increase its value. Inevitably, there are risks
involved in such a recovery programme and, having reviewed the Audit, the Board
is concerned about the possible cash requirements of the Airbus business in the


“The Board therefore believes that it is in the best interests of the Company to
exit at the Price determined by the independent expert.  In arriving at this
judgement, it weighed with the Board that if it does not proceed with the
Proposed Disposal, it may be necessary to retain BAE Systems’ interest in Airbus
for an extended period to be confident that it could be sold for materially more
than the Price.


“Following repayment of debts outstanding between BAE Systems and Airbus at
completion and the payment of transaction related costs, net proceeds to BAE
Systems are estimated to be approximately e1,784 million (£1,212 million (2)).
The Board proposes to return up to £500 million to BAE Systems’ shareholders by
way of on-market purchases of shares following completion of the Proposed
Disposal.  The Board also intends to consult with the trustees of the Company’s
pension schemes and the Pensions Regulator with regard to any further investment
in those schemes.  The remaining proceeds, together with BAE Systems’ other cash
resources, will be available for debt repayments and future investment in the
Company and to pursue selected acquisitions in the core defence business.

“Due to its size, the Proposed Disposal requires the approval of BAE Systems’
shareholders at an extraordinary general meeting.  Further details regarding
the Proposed Disposal, including the time and location of the extraordinary
general meeting, will be set out in a circular to be sent to shareholders



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