While its ownership remains a precise, if complex, national and industrial balance, EADS is making progress rationalising its holdings
If EADS has a complex ownership structure, it is because of the company's complicated origins. State owned, partially privatised and publicly traded companies in France, Germany and Spain came together to form EADS in July 2000, necessitating an intricately balanced cross-border share structure that remains essentially unchanged today, while the company has streamlined its operating divisions.
The ownership structure is likely to stay unchanged until after the Airbus A380 ultra-large airliner enters service in 2006. France's Lagardère has indicated it could start selling off its stake after then, and analysts expect Germany's DaimlerChrysler would follow suit to maintain the delicate cross-border balance of ownership.
That Europe's largest aerospace company could be majority-owned by a French media group and a German car manufacturer is the result of a series of post-war consolidations that had produced two national giants via two distinctly different paths.
In Germany, DaimlerChrysler Aerospace (Dasa) was the result of an industry-led consolidation begun in 1985, when Daimler-Benz acquired MTU and a majority holding in Dornier. MBB was added in 1987 and Dasa, then Deutsche Aerospace, was formed in 1989 as a subsidiary of the publicly traded car manufacturer.
It was not until 10 years later that Aerospatiale Matra emerged in France from the fourth in a series of consolidations that had reduced the country's state-owned aerospace industry from six companies to one, Aerospatiale, that was then merged with Matra Hautes Technologies, an affiliate of the publicly traded Lagardère Group - which had merged with Matra in 1992.
By the late 1990s, Europe's aerospace industry was ripe for consolidation, but it nearly turned out differently. British Aerospace broke off merger talks with Dasa in late 1998 to pursue a domestic takeover of GEC-Marconi. Jilted Dasa reacted quickly, signing a memorandum of understanding in June 1999 to merge with Spain's state-owned CASA then, four months later, announcing plans to merge with Aerospatiale Matra.
Complex task
Bringing together companies from three countries, each with a different ownership structure, was no easy task. Aerospatiale Matra was still a young company, having been formed in July 1998 when Lagardère received 33% of Aerospatiale in exchange for the transfer of Matra Hautes Technologies and a payment of FFr850 million to the French government. CASA, meanwhile, had been stated-owned since 1971.
The ownership structure agreed for EADS was necessarily complex, as it had to accommodate both the French and Spanish states and the French and German industries. This was achieved by creating a contractual partnership, EADS Participations, and incorporating the company in neutral territory, the Netherlands. The French and German sides each have equal shares in the partnership, currently around 30%, while Spain holds 5.5%. These are called indirect shares. The partnership, in turn, owns just over 65% of the direct shares in the operating company.
This relatively simple arrangement effectively isolates EADS from the complexity of the ownership structures in each country, particularly France. Spain's indirect shares are held by state holding company SEPI, while Germany's are held by Dasa and, therefore, ultimately by DaimlerChrysler. In France, the indirect shares are split 50:50 between state holding company SOGEPA and D‚sirade, which is wholly owned by Lagardère following the transfer of the 26% stake initially held French financial institutions BNP Paribas and AXA. EADS Participations exercises the voting rights attached to the 65% of direct shares held by DaimlerChrysler, SEPI and SOGEADE. The French and German entities each have four directors on the board of the partnership, with a ninth provided by SEPI.
Share structure
In addition, both the French state and Dasa hold direct shares in EADS, although the former's stake has been reduced from 0.34% in 2000 to just 0.06%. In addition, in July DaimlerChrysler "sold" its 2.73% direct holding in EADS in a hedging accord that locks in the €340 million ($410 million) price until 2007. This will help pay for the agreed €450 million purchase in 2007 of the city of Hamburg's 6.15% stake in DaimlerChrysler's aerospace holding company, DCLRH, which owns 100% of Dasa.
The balance of direct shares is owned by the public (30.1%), with employees holding about 3.5%, and by EADS itself (1.47%). By contrast, only about 19% of Aerospatiale Matra was floated publicly. So far EADS shares are traded only on the Frankfurt, Madrid and Paris stock exchanges.
As can be expected, complex restrictions surround the sale of EADS shareholdings. These include pre-emption and "tag-along" rights that favour either the transfer of shares to other partners or co-ordinated public offerings that maintain the national ownership balance. It is the latter route that analysts consider most likely once the heavy investment in A380 development is behind the company.
Insiders think Lagardère will divest its stake slowly as revenues grow with accelerating Airbus deliveries, offering the shares on the stock exchange. The same is likely for DaimlerChrysler. This could lead to a situation, perhaps less than 10 years from now, when most EADS shares are traded publicly.
The ownership structure does not give the governments direct influence over EADS - with one exception. The French government has a veto right and call option on the company's ballistic missiles activity if a third party not affiliated with either DaimlerChrysler or Lagardère acquires more than 10% of EADS. Otherwise the French government nominates one member of the supervisory board.
While EADS's ownership structure has remained essentially unchanged since its formation, the company has expanded and rationalised its holdings. One of the first actions was to transform Airbus from a consortium into a single corporate entity, owned 80% by EADS and 20% by BAE Systems, with its own facilities in France, Germany, Spain and the UK. Airbus Military, meanwhile, is a Spanish company formed to develop and produce the A400M transport, in which Airbus holds 69.44% and EADS Casa 29.56%.
In 2001, the Franco-Italian Avions de Transport R‚gional consortium was also converted into a single company, ATR Integrated, owned 50:50 by EADS and Finmeccanica, and with Airbus France and Alenia Aeronautica building the airframe. Missile manufacturer MBDA was also formed as a single company in 2001, with BAE and EADS each holding 37.5% stakes and Finmeccanica 25%. After lengthy talks, EADS subsidiary LFK is expected to be integrated into MBDA by year-end, but hopes of a merger with rival German missile house BGT remain remote.
Space progress
Progress has also been made in rationalising EADS's space activities, and it now owns 100% of satellite manufacturer Astrium after acquiring BAE's 25% stake in 2003. EADS Space is now prime contractor for the Ariane 5 launch vehicle and, directly and indirectly, holds over 27% of operator Arianespace.
EADS holds 46% of Dassault Aviation, but has no direct control over the French combat-aircraft and business-jet manufacturer, with a management "Chinese wall" avoiding potential conflict between the Eurofighter and Rafale programmes. EADS and DCLRH, through holding company DADC, own 93.6% of Germany's Dornier, and EADS also holds 5.67% of Embraer as part of a larger strategic French industrial stake in the Brazilian manufacturer.
Moves to expand EADS's holdings have so far been in support of aircraft sales. In 2001 EADS Casa acquired 51% of Polish aircraft manufacturer PZL Warsawa-Okecie so as to assemble C-295 transports locally, and EADS also took a 26.8% stake in NH90 customer Finland's Patria Industries. Early in 2002 Eurocopter Romania was formed with IAR Brasov, with the EADS subsidiary taking a 51% stake in the joint venture to assemble EC135s. A year later Eurocopter acquired Australian Aerospace to assemble Tiger combat helicopters locally.
Many of EADS's programmes remain traditional European joint ventures, including Eurofighter, the management company for the Typhoon fighter programme, in which EADS holds 46% to BAE's 33% and Finmeccanica's 21%; and NH Industries, responsible for the NH90 military helicopter, in which EADS has 62.5% and Finmeccanica 32%.
Today, Europe's other aerospace giants - BAE Systems, Finmeccanica and Thales - remain outside EADS, but co-operate through joint ventures. An attempt by EADS to combine its military aircraft activities with those of Finmeccanica in a 50:50 joint venture collapsed in 2002 and the Italian state holding company has elected to combine its space activities with those of Astrium rival Alcatel. Meanwhile, BAE focuses on the US market. Nonetheless, EADS does not rule out a future merger with one or more of its European rivals.
GRAHAM WARWICK / WASHINGTON DC
Source: Flight International
