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Paris (AFP) Dec 06, 2012
German auto group Daimler slashed its holdings in aerospace giant EADS on Thursday, but EADS shares still surged higher, hours after France and Germany ended their grip on the boardroom and two months after the collapse of merger talks with BAE Systems.
EADS director for strategy Marwan Lahoud described a share restructuring plan unveiled late on Wednesday and which ends the ability of the French and German governments to effectively control the group, as a "new birth."
The European Aeronautic Defence and Space company (EADS) owns airline maker Airbus which accounts for most of its business, but also builds rocket and missile launchers, satellites, fighter aircraft and helicopters.
Lahoud told the French radio station Europe 1, that from now on "decisions will be taken within the company."
He also said that the chance of a tie-up with the British defence group BAE Systems would not come again but noted that if a similar situation were to arise "I think we would be in a better position to find a solution."
Lahoud nonetheless also said: "We are in the process of reviewing our strategy. At the moment, we do not envisage any kind of acquisition."
The price of EADS shares, which had climbed as prospects for the restructuring increased, shot up by a further 7.97 percent to 29.40 euros on Thursday, above the price at which Daimler sold its shares.
The new level is close to where EADS shares traded before the group revealed on September 12 that it was holding merger talks with BAE Systems, which had caused EADS stock to nose dive.
The ratings agency Moody's said Thursday that it had cut its assessment of EADS debt by one notch from "A2" from "A1" however because the company was less likely to get government backing.
Moody's maintained its stable outlook on EADS debt.
"The rating downgrade reflects lower expectations for potential government support," noted Russell Solomon, Moody's lead analyst for EADS.
Shortly after trading began on Thursday, Daimler said it had halved its holding in EADS, as planned under the restructuring, raising 1.66 billion euros ($2.2 billion).
"Daimler today sold 61.1 million shares in EADS ... The price per share was set at 27.23 euros, which corresponds to the EADS closing price in Paris on Wednesday," Daimler said.
This cut Daimler's stake in EADS to 7.5 percent, and buyers included the German state-owned investment bank KfW, which purchased a stake of 2.76 percent and the Dedalus investor consortium, which acquired 1.9 percent, the statement said.
EADS was created in July 2000 through a merger of German defence group DASA, Aerospatiale-Matra of France, and Spanish group CASA.
Success from failure
Under an initial shareholder pact intended to balance national interests, the French state held 15 percent of the group and the French industrial and media group Lagardere 7.5 percent along with the combined voting rights.
Daimler held 15.0 percent, and a consortium of public-private German interests 7.5 percent, all on behalf of the German public interest. A Spanish public holding company holds another 5.45 percent.
Under the new deal, Daimler and Lagardere are to cut back their EADS stakes, leaving German and French state interests each holding 12.0 percent and Spain about 4.0 percent.
The percentage of freely floating EADS shares will jump from 49 percent to more than 70 percent, the group said.
Sources close to French Economy Minister Pierre Moscovici highlighted a clause that would bar any new EADS shareholder from acquiring more than 15 percent.
The ambitious deal with BAE Systems, which would have created a vast group to compete with US rival Boeing, is believed to have failed largely because Germany feared being sidelined, and was worried about the impact on jobs at German aerospace factories.
The British side was concerned that France and Germany would interfere unduly in a merged group, and that this could undermine confidentiality in relationships over US defence contracts.
Under the capital restructuring plan, EADS is to buy and cancel up to 15 percent of its shares.
A portfolio manager at Barclay Bourse, Renaud Murail, explained: "The price is being supported by the outlook for a programme to buy up shares at the beginning of 2013.
"Apart from the fact that EADS has plenty of cash, this programme will compensate for the effect of the arrival on the market of shares held by Daimler and Lagardere which are pulling out."
Brokers at Bank of America - Merrill Lynch upgraded EADS shares to a "buy" recommendation from "sell", commenting that "the influence of the governments has been sharply reduced" and that the company had paid attention to observations from investors and had sought to protect their interests.
Governments are to give up their vetoes on decisions, but Lahoud noted that EADS, given the products it makes, was not an ordinary company. "The states will always have something to say because we are strategic industries regarding their security."
A source close to French Economy Minister Pierre Moscovici said: "The more an operation affects strategic sectors, the more the state's role - both direct and indirect - and their rights will be important."
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