BAE exits space business with £54m sale of Astrium to EADS

BAE Systems, the UK defence contractor, made its long expected exit from the space business yesterday when it announced a deal to sell its 25 per cent interest in the satellite concern, Astrium, to EADS, Europe's leading aerospace group.

EADS has agreed to pay €84m (£54m) to take over the BAE Systems stake and gain complete control of Astrium. The group plans to bring a separate business producing Ariane space launchers into Astrium, creating a concern employing just under 10,000 in France, Germany, Spain and the UK.

Both BAE Systems and EADS have agreed to invest €84m in the business to speed up the restructuring, making the overall transaction cash neutral, the two companies said.

The move had long been expected but delayed by wrangles over the terms of the deal and a sharp deterioration in the market for commercial space systems which has cut the value of BAE Systems' stake. When a sale was first mooted in July last year there were indications that BAE Systems' stake would fetch about €165m.

A spokesman for EADS said the move reflected the group's belief that space systems would be a core part of a range of important civil and military technologies in the future including air traffic management systems, navigation aids, air defence and command and control.

EADS said that it was sticking to plans to return the company to profit in 2004. "Clearly we believe the space business will be coming back," he said.

Although the companies were confident last night that the deal would soon be concluded, BAE Systems has agreed to pay €55m to EADS if the deal falls through.