Airbus partners may pay BAe in deal to create single company
Tuesday 14 January 1997
The agreement to transfer manufacturing operations into the new company along with engineering, testing, procurement and customer service activities is a crucial first step on the road to the restructuring of Airbus.
A binding memorandum of understanding signed yesterday by the four partners will enable Airbus to operate as a fully commercial entity as opposed to the sales and marketing organisation that it presently is. But the pooling of production assets is likely to lead to financial compensation being shared out among the partners.
BAe, which makes wings for the Airbus family at its Chester plant, has a 20 per cent stake in Airbus. Aerospatiale of France and Daimler Benz of Germany each have 37.9 per cent and Casa of Spain has 4.2 per cent.
However, BAe is likely to argue that the efficiency and profitability of its own Airbus facilities will make them worth more than 20 per cent of the equity when Airbus converts.
Rather than fiddle with the existing shareholdings, the partners will determine respective valuations for the assets each company is contributing. The Belgian arm of accountants Price Waterhouse is conducting an audit at all four Airbus partners with the aim of drawing up a pro-forma set of accounts by the end of the year.
This is likely to lead to compensation being paid. One estimate is that BAe could be in line for payments worth up to pounds 400m. An alternative would be to adjust the basis on which Airbus shares out profits. Because BAe did not join the consortium until the early 1980s after the Airbus A300 had already been launched, it does not receive one-fifth of annual profits. The profit sharing formula could be amended to take account of the differing assets contributed to the new entity.
The assets to be contributed and their valuation will be decided by the end of 1997, Airbus said. The other tasks to be completed this year include drawing up a new management structure and deciding where the company will be registered. The four partners will also have to resolve the tax implications of converting to commercial status.
There had been reports that the French were less keen than the British or Germans to transfer production facilities into the new company. But industry sources rejected this, suggesting Aerospatiale's main concern was not with the principle of pooling assets but with the timing of it, being anxious to ensure it did not happen until its merger with Dassault was completed. "The MOU signed by the partners is a very good compromise which satisfies everyone," said one source.
The restructuring will enable Airbus to overhaul its efficiency levels and procurement policy in a move that is likely to result in several thousand job losses across Europe.
Airbus will also be able to tap world financial markets for funding for projects such as the 600-plus seater A3XX super-jumbo.
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