Lehman puts $18bn price tag on Airbus float

Michael Harrison
Tuesday 22 October 1996 23:02
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Airbus Industrie, the four-nation aircraft manufacturer, could be worth up to $18bn (pounds 11bn) when it is converted into a single corporate entity and floated off, according to the first authoritative attempt to value the business.

The study by the US investment bank Lehman Brothers also estimates that Airbus, in which British Aerospace has a 20 per cent stake, could make profits of $21bn over the next seven years before research and development costs and repayment of launch aid.

Lehmans also forecasts that once Airbus has overhauled its status to become a public company it could launch a bid for Douglas Aircraft, the commercial jet division of McDonnell Douglas, to create the world's biggest aircraft manufacturer, surpassing the mighty Boeing.

Based on Lehmans' estimate that Airbus could be worth $15bn-$18bn, BAe's stake is valued at $3bn-$3.6bn. This is the equivalent of more than a third of BAe's present market value of pounds 5bn.

The three other partners in Airbus are Aerospatiale of France, Daimler Benz of Germany and Spain's Casa. The four partners have agreed to transform Airbus into a public company by 1999 and aim to have signed a binding memorandum of understanding by the end of this year.

Lehmans believes Airbus would be even more profitable in the short term if it did not have the $13bn costs of launching the A3XX super-jumbo and other programmes.

The A3XX, a double-deck airliner capable of carrying more than 600-800 passengers, is likely to cost $10bn to launch. Airbus could get up to a third of the launch costs from the four partner governments but the remainder would have to come from the industrial partners, other risk- sharing investors and the financial markets.

The Lehmans analysis calculates that Airbus's annual sales will rise from just under $10bn in 1995 to nearer $20bn over the next few years. But acquiring Douglas Aircraft would instantly raise its market share above 50 per cent, toppling Boeing from number one slot.

A merger, the study adds, would bring significant savings on the A3XX programme, allow Airbus to manufacture more of its aircraft in dollars and reduce the total R&D bill.

Comment, page 19

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