Eads, the maker of Airbus, said yesterday that it would protect shareholders’ interests as talks towards a vast corporate revamp continued, helping to push the company’s share price skyward.
In a statement, Eads, the European aerospace giant, confirmed press reports “that key shareholders are discussing potential changes in the company shareholding structure and corporate governance.”
“The company is participating actively in such discussions ... with the objective to preserve and enhance, where appropriate, the interests of all stakeholders, including shareholders, clients and employees.”
Talk of an imminent shake-up deal sent shares in the European Aeronautic Defence and Space Company (Eads) soaring by 2.5% in afternoon trading yesterday on a Paris market up 0.6%.
Traders were also cheered by the Eads assurance to protect shareholders, which was read as a signal that the company, which holds an €8bn ($10.4bn) cash war chest, would soon buy back shares.
Conglomerate Lagardere of France and German auto maker Daimler have made it known they wish to leave Eads, in which each company holds a stake of 12.5%.
But the imminent exits by Lagardere and Daimler upends a corporate structure carefully negotiated in 2000 by France, Germany and Spain to preserve national interests in a sensitive sector.
Reports in the Financial Times and Wall Street Journal said Eads was planning a vast share buyback programme to fill the shoes left by Lagardere and Daimler, which represented France and Germany respectively on the Eads board.
Sources said that after the revamp, France and Germany would each hold 12% of a newly structured Eads, joined by Spain with around 4% and keeping the combined voting block below a 30% legal threshold..
A board meeting was held yesterday to continue talks on a deal, sources said, adding that an announcement was imminent.
French President Francois Hollande, on the sidelines of a Franco-Italian summit, said that “a deal was close”, but that it was “not yet completely signed.”
A German economy ministry spokesman added yesterday efforts were being made to reach a deal as quickly as possible.
Eads has been controlled by a combination of the French state and industrial partners in France and Germany since it was founded in 2000 as a European counterweight to Boeing.
But the system has come under strain as the core industrial shareholders, Daimler and Lagardere, pledged to focus on their core activities.
Germany has meanwhile stepped forward to buy some of Daimler’s shares in a surprise reversal of a previously non-interventionist policy towards major industries, raising concerns of growing political interference in Eads.
Eads’ ownership structure has also become an urgent issue since $45bn merger talks with UK arms firm BAE Systems collapsed in October, exposing the fragility of its existing shareholder structure.
“The BAE discussions caused a lot of movement and demonstrated to people like Lagardere that they could find a way out,” said a person familiar with the discussions.
Negotiators are attempting to choreograph a sequence of moves designed to consolidate state shareholdings while letting industrial partners out of Eads without hurting its share price, which has risen 7% this year on robust jetliner sales.
Germany will build its stake by buying 7.5% from a bank consortium, whose shares are under Daimler’s voting control, and 4.5% from Daimler which will part separately with a further 3%, sources close to the talks said.
That will leave Lagardere and Daimler with a further 7.5% each left to sell, but cash-rich Eads will announce a share buyback at the next shareholder meeting to help mop up excess stock and defend its share price, the sources said.
French chairman Arnaud Lagardere is expected to remain in his post until a shareholder meeting in the spring, which is likely to bring in a mainly independent board led by a new chairman, the sources said.
Germany has not been a direct shareholder before, with 22.5% of voting rights instead held by Daimler. On the French side, the state owns 15%, with 7.5% held by media group Lagardere. Spain owns 5.5%.
A German consortium called Dedalus, made up of private financial institutes and public sector owners including state controlled bank KfW, holds a 7.5% stake in Eads but the voting rights are part of those controlled by Daimler.
“The currently discussed potential changes are likely to require the approval of Eads shareholders and there can be no certainty that these discussions will be conclusive,” Eads said.
Two sources familiar with the discussions said a deal could be reached by late last night.
A source in Germany said a share buyback by Eads was also possible to reduce the share overhang.
Under Dutch law that governs Eads, a group of shareholders cannot control more than 30% of the votes without triggering a mandatory bid for the whole company.
Reuters reported on Friday that France and Germany were close to a deal to shake up Eads after France agreed to hive off part of its 15% stake to preserve parity with Germany inside a core government shareholder group.
Under this arrangement, France is expected to place 3% in a non-voting structure in the Netherlands, where Eads is registered, while keeping economic control of the stock.
A potential mismatch of shareholdings had been a key stumbling block in the talks.
A German newspaper report said talks were also looking at what level of state representation there could be on the company’s board, with suggestions of two places each for France and Germany and one for Spain.
The new arrangement is due to be put to shareholders in the spring of 2013, the newspaper said.