European Aeronautic, Defence & Space Co. (EAD) was urged by the Children’s Investment Fund to distribute its stake in Dassault Aviation SA (AM) to shareholders as the hedge fund increases pressure to boost returns.
EADS Chief Executive Officer Tom Enders should distribute the 46 percent stake in the French maker of fighter-jet and corporate business planes in the form of a dividend rather than having to sell at an “unattractive price,” according to a letter the London-based fund, known as TCI, sent to the Toulouse, France-based manufacturer.
TCI’s proposal comes as EADS, the parent of commercial-aircraft manufacturer Airbus SAS, considers the future of the Dassault Aviation holding, which it received from the French government. The Dassault family controls the Paris-based company with 51 percent of the stock, and less than 4 percent is publicly traded.
“Once the distribution is completed, analyst coverage of the company would increase and the higher liquidity of the shares would make them more investible,” said TCI, which met with EADS Chief Financial Officer Harald Wilhelm on Sept. 11.
“Central to our strategy is efficient capital allocation and the creation of shareholder value,” Rainer Ohler, an EADS spokesman, said in an e-mail. “We are keeping our shareholders fully appraised of our plans and progress, but we don’t comment in public on individual shareholder proposals.”
Dassault Aviation draws 70 percent of annual revenue from corporate-jet sales, and the rest from Rafale fighter planes. TCI first contacted EADS in August, saying the stake was a poor investment.
Dassault Aviation CEO Eric Trappier said Aug. 29 that he had has held talks with EADS about the stake, telling Enders that his company was “neutral” about EADS’s future plans, given that the Dassault family owns the majority.
The Airbus parent has been a stakeholder in Dassault since EADS’s creation in 2000 after France gave the stake to a predecessor company, Aerospatiale SA. Enders has said he would reconsider the future of all assets that EADS doesn’t directly control. The French government has a right of first refusal in the event that EADS decides to sell its stake.
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