BBC

Internal catfight 

BAE ready to sue over Airbus
25/06/2006)

BAE systems is preparing to take legal action if a valuation for its 20 per cent stake in Airbus, the troubled Franco-German aircraft maker jointly owned by BAE and Eads, fails to live up to expectations.

The British defence group fears the valuation by N M Rothschild, due by next week, could cut its proceeds on the sale by as much as €1bn (£690m) according to City estimates.

BAE has exercised a put option to sell its Airbus stake, but before the deal was completed the plane maker announced delays on its flagship A380 aircraft that will seriously hit earnings. Eads, the owner of the remaining 80 per cent of Airbus and the buyer of BAE's stake, saw its market value plunge by £4.5bn on this month's profits warning, implying a £1bn reduction in BAE's stake.

Mike Turner, BAE's chief executive, and Geoffrey Rose, his finance director, who both sit on the Airbus shareholders' committee, are believed to have been livid that they were not told the extent of the A380's problems earlier.

It is understood that legal action has been discussed but that no decision has been made; directors are reserving their position pending the outcome of Rothschild's valuation.

Action could be taken against Eads. The two shareholders in Airbus have been unable to agree a price and appointed Rothschild, an independent investment bank, to calculate a value. BAE can cancel the deal and retain its holding if it considers the price too low, but the figure will be binding on Eads.

The City expected BAE to receive up to €4.5bn. Zafar Khan, an analyst at SG Securities, the French bank, has a baseline figure of €3.5bn and says: "If BAE can get €4bn we will be happy. Rothschild are going to be in a very difficult position; I would not want to be them." 
 

Really bad time for Airbus