A decision on whether BAE Systems is to press ahead with the sale of its 20 per cent stake in Airbus has been delayed by at least a month after the company ordered a full audit of the troubled aircraft manufacturer yesterday.
The decision to demand an audit follows a valuation of the BAE stake by the investment bank Rothschild, which concluded it was worth only €2.75bn (£1.9bn). This is much less than BAE had expected to receive and less even than the "conservative" valuation of €3.5bn in the accounts of Airbus's majority shareholder, the Franco-German aerospace and defence group EADS.
The audit will examine all the information which Rothschild had access to, including Airbus's revised industrial plan, before arriving at its controversial valuation. This will include the prospects for the A380 superjumbo, which has been hit by serious production delays, and the development of the Airbus A350 jet, which is expected to cost twice the initial estimate of €4bn.
BAE executives remain furious that a week after the company decided to exercise a put option to sell its stake, EADS warned that production problems on the A380 would delay deliveries of the aircraft by six to seven months, potentially slicing €2bn from EADS's profits over the next four years. The warning caused a 25 per cent drop in the value of EADS shares.
BAE said it did not believe any "credible or serious" assessment of the impact of the A380 delays could be made so rapidly and wants the audit to establish how bad the problem is and whether Rothschild was correct in its valuation.
BAE must give Airbus two weeks' notice of the audit, to be conducted by an independent financial expert appointed by BAE. It will take four to six weeks, which means BAE's board will not be in a position to decide whether to press ahead with the sale to EADS at the valuation arrived at by Rothschild or hold on to its Airbus stake before the end of August. Either way, BAE will then have to hold an extraordinary meeting to allow shareholders to vote on the matter, which will take a further 21 days to convene.
BAE appears to have abandoned the third option of seeking another buyer for its Airbus stake in an attempt to force up the price which EADS finally pays. Under the shareholder agreement between the two companies, EADS is allowed to match any higher offer BAE might receive.
There also remains the possibility of legal action by BAE against EADS or Airbus or both over their failure to notify it of the production problems on the A380, even though EADS's management became aware of them in April - two months before the company's shock profits warning.Reuse content