EADS Investors Back 15% Buyback to Ease Ownership Changes
European Aeronautic, Defence & Space Co. investors gave approval for the purchase of 15 percent of the company’s stock at a maximum 50 euros a share in a move to bolster its value after the sale of block holdings.
Shareholders meeting in Amsterdam approved the resolution as part of the most sweeping changes to EADS’s corporate structure since its formation in 2000. While the buyback could cost 6.2 billion euros ($8 billion) based on the agreed terms, Chief Executive Officer Tom Enders said the plan is to limit spending to one-third of its 12.3 billion euros in cash.
The revamp clears the way for founding investors Lagardere SCA (MMB) and Daimler AG (DAI) to exit, increases the free-float, and aims to curb government influence over operational affairs at a company whose products include Airbus SAS commercial aircraft, helicopters, fighter planes, missiles and defense electronics.
“It’s an important milestone,” Enders told journalists after the meeting. “Today we can launch into a new phase where we become much more normal than we were before.”
Board members approved today will meet informally this evening to choose a new chairman, which EADS has said should be Denis Ranque, former chief of French avionics supplier Thales SA. (HO) Directors can’t meet officially until the new shareholder structure has been consummated, something that may take a day or two as lawyers hammer out final details.
The board should decide on the size and timing of the share repurchase by April 2, the company said. When plans for the move were first announced EADS stock was trading at about 26 euros, and has gained about 50 percent since then to almost 40 euros.
If implemented in the first half, a buyback would be divided into two equal tranches, EADS said in documents today.
The purchase will be determined by “market conditions,” according to Enders, while Chief Financial Officer Harald Wilhelm told shareholders it should also leave room for capital spending and future dividends.
Under the new corporate structure, the company’s free float will increase, even with the introduction of the German state into the ownership. France, which has a 15 percent stake, will see that drop to 12 percent, matching the German holding, and both will lose their veto rights over major decisions.
New board members besides Ranque include Anne Lauvergeon, the former CEO of French nuclear-reactor manufacturer Areva SA, and Germans Manfred Bischoff, once co-chairman of EADS, and Hans-Peter Keitel, ex-CEO of builder Hochtief AG.
Enders said today he expects to finish a strategic review by about midyear, including a look at the balance between commercial and defense interests.
“We’re not in a hurry, the company is in good shape,” he said. “Don’t expect any spectacular developments.”
About one-fifth of EADS revenue comes from military activities, which Enders said was “fortunate,” given his expectation that European and U.S. defense spending will decline or stay flat through the end of this decade at least.
Enders said EADS’s defense business will be less hard hit than those of some rivals because programs such as the Eurofighter combat jet and A400M military transport, just preparing for first delivery, are shared between countries.
“Multi-national programs, as difficult as they are to get started, are equally difficult to unwind,” the CEO said, while adding that discussions with governments in coming years will be devoted to negotiating cuts, not starting new programs.
Enders also said he valued the “multi-domestic approach” that Ranque took at Thales, making it a major contractor in the U.K. and Australia, among other countries.
EADS said before today’s meeting that Spain will be allowed to reduce its stake earlier than planned, selling as much as 1.15 percent of stock by April 10 to cut the holding to about 4 percent. An initial agreement allowed no disposal until Jan. 1.
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