NAV20 From Australia, joined Nov 2003, 6209 posts, RR: 23 Posted (2 years 7 months 3 days 21 hours ago) and read 1797 times:
BAE has indicated that it will enforce its put option, and force purchase of its interest in Airbus on the basis of an independent valuation, unless EADS agrees to an acceptable price within a month.
"BAE Systems said it would turn to a put option to speed the sale of its 20 percent stake in Airbus to majority owner EADS if the two defence companies fail to reach an agreement this month.
"The British firm would generate as much as 4.5 billion pounds for fresh acquisitions from the sale, according to analysts who were surprised last month when BAE said it wanted out of the world's biggest civilian planemaker.
"On Tuesday, after more than three weeks of negotiations, BAE said the two sides would have until the end of the month to work out a price.
"If they cannot, an independent financial adviser will be brought in to determine a value, as called for under terms of a put option in the Airbus Shareholders Agreement, which the two sides signed in 2001.
"BAE Systems (BA.L: Quote, Profile, Research) confirms that it has issued a put option intention notice to EADS," the company said in a brief statement to the London Stock Exchange."
"The put option would introduce a formal valuation mechanism following completion of a further 30-day consultation process," an e-mail from a BAE spokesman said. "(This is) entirely in line with (BAE's) objective of divesting its 20 percent shareholding in Airbus in a timely manner."
This could have important 2006 cash flow implications for EADS. BAE's 20% interest is valued in EADS' Balance Sheet at E3.5B. - i.e. about twice the level of EADS' recent net annual profits. If nothing else, it will make it even more difficult to find funds for further research and development on the A350.
[Edited 2006-05-02 15:12:28]
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
Parapente From United Kingdom, joined Mar 2006, 307 posts, RR: 0 Reply 1, posted (2 years 7 months 3 days 20 hours ago) and read 1726 times:
It is surprising that you have had no replies to this posting.
Clearly there is a row going on here.I thought as much when BAE went public with their intension to sell rather than a joint annonouncement. Fur will be flying.
Timboflier215 From United Kingdom, joined May 2005, 631 posts, RR: 0 Reply 2, posted (2 years 7 months 3 days 20 hours ago) and read 1717 times:
i imagine that this is about the last thing that airbus and EADS needs right now. but since it is a stake specifically in EADS, rather than airbus, how much would it affect airbus' cash-flow and R & D budget?
NAV20 From Australia, joined Nov 2003, 6209 posts, RR: 23 Reply 3, posted (2 years 7 months 3 days 20 hours ago) and read 1682 times:
Actually, Timboflier, it's the other way round - BAE owns a 20% stake in Airbus. But Airbus' status is not that of an independent quoted company, legally (apart from a small unquoted holding company) it is a division of EADS; even though it is the source of a very high proportion of EADS' profits.
In any event, it comes to the same thing. EADS is responsible for meeting the terms of the put option, i.e. paying up the E3.5B. plus.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
Poitin From , joined Dec 1969, posts, RR: Reply 4, posted (2 years 7 months 3 days 20 hours ago) and read 1673 times:
Quoting NAV20 (Reply 3): Actually, Timboflier, it's the other way round - BAE owns a 20% stake in Airbus. But Airbus' status is not that of an independent quoted company, legally (apart from a small unquoted holding company) it is a division of EADS; even though it is the source of a very high proportion of EADS' profits.
In any event, it comes to the same thing. EADS is responsible for meeting the terms of the put option, i.e. paying up the E3.5B. plus.
And if EADS doesn't what happens? Can BAE sell the stock on the market? That would be fun, watching Boeing buy it!
Timboflier215 From United Kingdom, joined May 2005, 631 posts, RR: 0 Reply 5, posted (2 years 7 months 3 days 19 hours ago) and read 1664 times:
Quoting NAV20 (Reply 3): Actually, Timboflier, it's the other way round - BAE owns a 20% stake in Airbus.
thanks for the correction! did not realise this. i wonder why BAe are so keen to offload the stake that they want to force EADS to buy it? perhaps they have a spending spree in mind?!
NAV20 From Australia, joined Nov 2003, 6209 posts, RR: 23 Reply 6, posted (2 years 7 months 3 days 19 hours ago) and read 1656 times:
EADS doesn't have any choice, Poitin. It's a put option, not a 'notice to treat.'
I see that EADS itself has a press release out now, which quotes the terms. And includes a classic piece of wishful thinking - see the bit in bold type :-
"EADS confirms it has entered into a new phase in the consultations with BAE Systems on the potential sale of BAE Systems' 20 percent stake in Airbus. This follows the issuance by BAE Systems of a Put Option Intention Notice, a process contemplated in the Airbus Shareholders Agreement signed in 2001.
"Following completion of this consultation process, BAE Systems may - but is not obliged to - formally exercise its put option. At this point, there can be no certainty as to the result of this phase, however the negotiations will now be governed by the guidelines within the Airbus Shareholders Agreement."
NAV20 From Australia, joined Nov 2003, 6209 posts, RR: 23 Reply 8, posted (2 years 7 months 3 days 19 hours ago) and read 1607 times:
Quoting Poitin (Reply 7): OYE! I wonder what Enders did to piss off BAE?
That's an easily-answered question, Poitin:-
"FRANKFURT (Dow Jones)--Tom Enders, joint chief executive officer of European Aeronautic Defence & Space Co. (5730.FR), said at the weekend in Dresden that the price BAE Systems PLC (BA.LN) wants for its 20% stake in Airbus (ABI.YY) is "astronomical."
Is it only me that gets the impression that the whole Airbus hierarchy (with the possible exception of Humbert) doesn't have enough business savvy to run a fish-and-chip shop?
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
Poitin From , joined Dec 1969, posts, RR: Reply 9, posted (2 years 7 months 3 days 19 hours ago) and read 1561 times:
Quoting NAV20 (Reply 8): Is it only me that gets the impression that the whole Airbus hierarchy (with the possible exception of Humbert) doesn't have enough business savvy to run a fish-and-chip shop?
No, there is at least one other I know of, me. However, even Humbert is a question. In another thead,
"Meanwhile, Humbert says the company has determined that wing design changes will not have to be made on the A380, after a test specimen narrowly failed to meet the ultimate loads limit. An in-depth analysis has shown that the wing in question had been subject to loads in excess of the ultimate load targets ahead of the official test. Airbus found the structure was damaged in the earlier test so that it could not hold up a second time to the specified breaking point. Airbus also does not need to repeat the test, Humbert adds, because the manufacturer can demonstrate the premature rupture was caused by the earlier damage."
NAV20 From Australia, joined Nov 2003, 6209 posts, RR: 23 Reply 11, posted (2 years 7 months 3 days 18 hours ago) and read 1506 times:
VV701, all of those reasons, I'd expect. In addition, I believe that they find themselves 'estopped' from bidding for quite a lot of US defence business because they are regarded as 'European'. And obviously Boeing's door won't have been open to them.
The structure of EADS since it was formed in 2001 won't have helped. BAE have no seat on the EADS' Board, although effectively it has been sharing the risk of the company's operations.
[Edited 2006-05-02 18:20:24]
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
NAV20 From Australia, joined Nov 2003, 6209 posts, RR: 23 Reply 13, posted (2 years 7 months 3 days 18 hours ago) and read 1448 times:
BAE's intention may have been to set a timescale and establish a base-date for any valuation. EADS' shares have dropped E4.00 (say 12%) since Daimler-Chrysler and Lagardere started their sell-offs, so the value of BAE's stake may well have been dropping faster than any negotiations were progressing.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
Atmx2000 From United States, joined Oct 2004, 4574 posts, RR: 23 Reply 14, posted (2 years 7 months 3 days 16 hours ago) and read 1363 times:
Quoting NAV20 (Reply 11): VV701, all of those reasons, I'd expect. In addition, I believe that they find themselves 'estopped' from bidding for quite a lot of US defence business because they are regarded as 'European'. And obviously Boeing's door won't have been open to them.
The structure of EADS since it was formed in 2001 won't have helped. BAE have no seat on the EADS' Board, although effectively it has been sharing the risk of the company's operations.
I suspect being the minority partner in Airbus by a large margin has large downsides.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
GDB From United Kingdom, joined May 2001, 10189 posts, RR: 70 Reply 15, posted (2 years 7 months 3 days 16 hours ago) and read 1353 times:
The A350 wing work is already covered.
Easy way to solve this, the Trade Secretary Alan Johnson should use his power to veto the whole BAE safe.
If BAE don't like it-screw them, Just remind BAE of how much they are into Ministry Of Defence projects, of how they tried to stick their mistakes, their delays, on to the UK taxpayer. But three years ago, the government re-jigged the contracts that did not favour this often increasingly badly run company.
BAE has pissed away the civil market for near 15 years, through typically British short-termism.
Out of Corporate Jets in 1994, as that market boomed.
Dropped the plan to modernise the 146/RJ in the early 1990's, including replacing the engines with 2 R/R-BMW models.
Missing out on the RJ boom then doing a half hearted Avro RJ update only to cancel that.
Had the cash to buy Rover cars, Royal Ordanance factories and a range of others, in the late 1980's however, then made huge losses on them while ignoring their core business.
those are all going back 10 - 20 years. a little late for the present UK govt to take retribution for that list of failures!! i doubt the govt would want to get involved either, except to safe guard UK jobs. EADS and BAe are 2 private companies, after all. the fact that the management of one or both of them may or may not be incompetent is not up to the UK govt to fix!
Lumberton From United States, joined Jul 2005, 3507 posts, RR: 13 Reply 17, posted (2 years 7 months 3 days 13 hours ago) and read 1264 times:
Interesting. According to this article, if they exercise the put option as they are indicating they "may do" the whole process could be over by the end of July (assuming that's July 2006!). BAE threatens to exercise option in Airbus stake sale
Quote: Morgan Stanley, the US investment bank said in a research note, that BAE's move "clearly signals that if a price is not agreed shortly, BAE is highly likely to exercise its put."
"When all is said and done, more will be said than done".
NAV20 From Australia, joined Nov 2003, 6209 posts, RR: 23 Reply 18, posted (2 years 7 months 3 days 6 hours ago) and read 1191 times:
Quoting GDB (Reply 15): Easy way to solve this, the Trade Secretary Alan Johnson should use his power to veto the whole BAE safe.
In that context, GDB, it's quite interesting that the initial political opposition to BAE's move very evaporated quickly. We have to assume that BAE has much better information on Airbus' immediate outlook than we do. Possibly they were able to convince the politicians that ordinary commercial prudence justified them pulling out. After all, Daimler-Chrysler and Lagardere are selling down their stakes too.
About -
Quoting GDB (Reply 15): The A350 wing work is already covered.
- do you mean that BAE (as opposed to 'Airbus UK') are still involved in design work for Airbus? And when you say 'A350 wing work', do you mean the initial A350 design, or the current 're-think'?
If Airbus is still depending on BAE proper for wing design, BAE's pullout could have even bigger implications.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
Radelow From United States, joined Jul 2004, 426 posts, RR: 3 Reply 20, posted (2 years 7 months 3 days 5 hours ago) and read 1168 times:
Quoting GDB (Reply 15): Easy way to solve this, the Trade Secretary Alan Johnson should use his power to veto the whole BAE safe.
What a great idea! Let's get government more involved in the free market economyc and start telling companies what they can and can't do. Last time I checked Europe wasn't communist. The Airbus' ownership has tied up valuable capital that BAE can use to increase more of thei
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