Airbus has cut its stake in Dassault Aviation by selling 8% of the company back to the maker of Falcon business jets and Rafale fighters for €794 million ($989 million).
The €980/share transaction realised late on Friday, 28 November would appear to represent excellent value for Airbus, which has periodically faced calls to rid itself of a 46.32% minority share that paid it a dividend of less than €295 million for 2013. In August 2013, Airbus Group shareholder The Children’s Investment Trust estimated the Dassault stake to be worth about €4 billion, which would value the whole of Dassault Aviation at €8.6 billion. But the latest deal price would translate into a whole-company value of more than €9.9 billion.
The two companies have also agreed to co-operate as Airbus attempts to sell a further 10% of the company through further offers up to end-June 2015.
While these moves could be the beginning of a slow unwinding of Airbus’s position in Dassault Aviation, there would appear to be no risk that Groupe Dassault – whose other main business is the Dassault Systemes software house – will lose control of its aviation arm. Before the latest transaction, Groupe Dassault owned 50.55% of Dassault Aviation. After, it is to cancel 9% of its shares, leaving it with 50.95%. The net effect on Airbus’s stake will be to leave it at 42.11%
The Airbus stake is a legacy of François Mitterand-era French government attempts to nationalise Dassault. At the time, founder Marcel Dassault refused to sell, and a compromise was reached that saw government-owned Aerospatiale, a predecessor company of Airbus, purchase a minority stake.
Airbus investors including The Children’s Investment Trust regard the stake as a poor use of capital, which could be invested in Airbus or returned to shareholders through a special dividend. However, an outright sale is not straightforward. While in the latest transaction the French government agreed to waive its right of first offer, Paris is maintaining a clear right to stop any transfer of shares that would see Groupe Dassault’s stake fall below 40%.
That threshold is in no threat, regardless of what Airbus may do with its own holding. But the clear message is that Paris can ensure that Dassault, the supplier of Rafale fighters and key contractor in other French military aircraft projects, remains in control.
Meanwhile, the latest deal, combined with the planned share cancellation, leaves more or less unchanged a heavy 3% of Dassault Aviation shares on the open market. Such limited trading volume gives at best a weak signal as to the value of a company which earned €487 million in 2013 on sales of €4.59 billion. To value the company at around €9 billion is a generous 18 times earnings but, ultimately, a question mark hangs over any valuation.
More than half of Dassault Aviation’s orderbook is in business jets, where the Falcon family is a strong player in an oversupplied market. The rest is in a shrinking defence market where Dassault’s only large customer is budget-strained France. That situation could change if seemingly interminable negotiations over a deal to sell 124 Rafales to India are concluded. That deal was reached in principle in 2012, but no final resolution appears to be in sight.
Source: FlightGlobal.com
