Andrew Doyle/MUNICH Julian Moxon/PARIS
Trading in European Aeronautic Defence and Space (EADS) shares got off to a lacklustre start on 10 July with their value falling below the lower-than-expected €18.03 ($17.1) offer price. The flotation was oversubscribed, but only after the price was dropped below the anticipated €20-23 level to win over sceptical institutional investors.
Analysts attribute the slow start to doubts about the ability of the three companies to integrate fully, with concerns about the inevitable job losses and possible strike action resulting from the integration process.
A key concern remains the estimated $10.7 billion development costs of the yet-to-be-launched A3XX ultra large aircraft, which is not due to enter service until late-2005. EADS will own 80% of the Airbus Integrated Company, due to be established in January.
"There are worries about the cost of developing the A3XX, which will weigh heavily on return on investment and operational margins at least until deliveries begin in 2005," says one French analyst, adding that the 15%French Government EADS holding is also deemed unattractive.
EADS claims that it is "not disappointed", and that "investors are always a little hesitant when it comes to long-term investments". It adds: "There are no uncertainties with the A3XX, either technical or financial. We have no doubt that the A3XX will be launched at the end of the year."
EADS' offer price came under pressure after the Aerospatiale Matra share price dipped below €20 during the previous week. Shares in Aerospatiale, which merged with DaimlerChrysler Aerospace and CASA of Spain to form EADS, were swapped for those in the new company on a one-for-one basis.
Just under half of the 166.5 million shares issued on the Frankfurt, Paris and Madrid stock exchanges were new, raising around €1.5 billion of extra capital for EADS. The offer price valued the company at around €15 billion, substantially lower than earlier estimates.
Source: Flight International
