BAE Systems attempted to force the pace of negotiations over the sale of its 20 per cent stake in Airbus yesterday by giving the majority shareholder EADS a 30-day deadline to agree a price or go to a formal arbitration process.
If no deal has been struck by the beginning of June then BAE said it would exercise its "put" option under the shareholder agreement between the two sides. This involves the appointment of an investment bank, acceptable to both BAE and EADS, to come up with an independent valuation of the British company's shareholding in the European plane maker.
A BAE spokesman said that this process was expected to take a matter of weeks rather than months, adding that the decision of the independent investment bank is binding on both sides. At present, BAE is being advised on the sale of its Airbus stake by Goldman Sachs and Gleacher, while Merrill Lynch is advising EADS.
When BAE announced on 7 April that it had decided to sell its Airbus stake it said negotiations would be held face to face with EADS in an attempt to agree a price quickly. However, since then the talks have failed to make much progress. Last week Thomas Enders, one of EADS' joint chief executives said that BAE had come to the table with an "astronomical" valuation.
EADS values BAE's Airbus stake at €3.5bn (£2.4bn) but BAE has indicated it expects to receive nearer to £4bn for the shareholding and some estimates have even put the figure as high as £4.5bn.
Provided an agreement is reached, then BAE is likely to use part of the sale proceeds to fund a multi-billion pound return of cash to shareholders. Some of the money raised could also be used to finance further acquisitions of US defence businesses, although BAE has repeatedly ruled out a purchase of the American defence electronics company L3.
BAE's planned sale of its Airbus stake has raised concerns over the long-term security of the 125,000 UK jobs that depend on the Airbus programme. Britain makes the wings for the Airbus family of aircraft at factories in Broughton, north Wales, and Filton near Bristol.
There are fears that once there is no longer a British shareholder in Airbus, then future work will go to factories in France, Germany and Spain. An Airbus spokesman vigorously denied this, saying production would be placed at the most competitive sites, noting that the UK government had in the past provided substantial launch investment for various Airbus programmes.Reuse content