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French Firm Lagardère Calls for Review of Planned EADS-BAE Merger

Oct. 1, 2012 - 09:11AM   |  
By PIERRE TRAN   |   Comments
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PARIS — Lagardère, one of the core shareholders of EADS, on Oct. 1 called for better protection of French investor interests in a planned merger of the European aircraft and defense group with BAE Systems.

“This project, despite the industrial and strategic potential, has not so far shown that it would create value for EADS,” the family-controlled media conglomerate said in a statement.

“Lagardère considers, at this stage, the conditions of the merger between EADS and BAE to be unsatisfactory,” the company said.

“Consequently, Lagardère calls on the EADS management immediately to review the planned merger between EADS and BAE, to take into greater account the interests of French shareholders in the control of EADS,” the statement said.

Lagardère holds a direct 7.5 percent stake in EADS through the Sogeade holding company, which also holds the French state’s 15 percent stake in the European aerospace group. Lagardère halved in 2009 its stake in EADS from the original 15 percent stake agreed to in 2000, when EADS was created by France, Germany and Spain.

Arnaud Lagardère, owner of the eponymous company, has sought to diversify the publishing group into a multimedia business.

The proposals giving EADs shareholders a 60 percent stake in a merged company, with BAE getting the remaining 40 percent, have already riled the German economics ministry, according to a document leaked to Reuters last week.

The ministry said the proposal did not correctly reflect the actual value of the two companies, which it put at closer to 70-30.

That came as a bit of a surprise to financial analysts in London.

Investment bank Espirito Santo reckoned the terms of the deal were already so advantageous to EADS that it titled its recent market report on the merger the “Grand Theft Aero.”

Writing before the Lagardère report was made public, Sash Tusa, a partner at the British-based analysts Echelon Research, described the efforts to amend the terms as “ horse trading between different stakeholders, which will continue for some time: There are some BAE shareholders who say the ratio should be 50-50; everybody is entitled to an opinion.”

“The ratio is pretty much fixed. I would be astonished if, when any formal proposals come out, they are anything other than 60-40. Politicians vs. investors: It is all posturing at this stage, and they all come from different starting points and have different positions and valuations,” said Tusa.

Andrew Chuter in London contributed to this report.

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