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New EADS Rules Seek To Prevent Government Interference

Dec. 5, 2012 - 02:25PM   |  
By PIERRE TRAN   |   Comments
EADS announced that Germany will buy a direct 12 percent stake in the European aerospace and defense company, as Berlin works toward equal footing with Paris. “We are making a big leap forward in terms of governance, actually the most important change since the creation of our company more than 12 years ago,” EADS Chief Executive Tom Enders said.
EADS announced that Germany will buy a direct 12 percent stake in the European aerospace and defense company, as Berlin works toward equal footing with Paris. “We are making a big leap forward in terms of governance, actually the most important change since the creation of our company more than 12 years ago,” EADS Chief Executive Tom Enders said. (Bulent Kilic /AFP via GettyImages)
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PARIS — EADS has announced that Germany will buy a direct 12 percent stake in the European aerospace and defense company, as Berlin works toward equal footing with Paris. The plan allows industrial shareholders Daimler and Lagardère to sell down their stakes and creates new rules designed to prevent governments from interfering with operations and strategy.

“France and Germany intend to build equal ownership positions, while the present core industrial shareholders Daimler AG and Lagardère SCA, are provided with a path to partially divest and will eventually be free to trade their shares at their discretion,” EADS said in a Dec. 5 statement.

“France, Germany and Spain have agreed on a capped government shareholding (approximately 12 plus 12 plus 4 percent),” EADS said.

Lagardère, a family-controlled company, said in a statement it welcomed the shareholder agreement, which will deliver a “normal governance” and allow the company to sell the bulk of its EADS stock.

The number of EADS shares on the market will rise to more than 70 percent compared to 49 percent as the new agreement is implemented.

As part of the new shareholders’ plan, EADS will buy back and cancel a total 15 percent of the shares in a two-stage deal. A first tranche of buy back will be for up to 7.5 percent and open to all EADS stockholders. A second tranche, also for up to 7.5 percent, will be reserved for Lagardère to sell.

“National defense companies” will be formed to protect specific French and German national security interests, EADS said. The companies will hold sensitive military assets. Berlin and Paris have agreed to three outside directors to sit on the board of respective national defense companies.

New rules seek to prevent any government interference in the running the company or strategic decisions.

“Under the new governance scheme, no veto right will be given to any group of directors in the board or any shareholder in the shareholders meeting,” EADS said.

The new agreement replaces a shareholders pact set up in 2000 when EADS was created from the merger of Aérospatiale Matra of France, DaimlerChrysler Aerospace of Germany and Construcciones Aeronauticas SA of Spain.

The future EADS board will have 12 members, including eight non-executive members. The majority of directors and two thirds of the executive committee will be EU nationals.

Daimler plans to sell up to 7.44 percent of its 15 percent holding this month, with the state-owned KfW bank buying around 2.76 percent. The state bank will also buy 7.44 percent held by the Dedalus consortium of state banks and regional states.

The total holdings of the KfW bank, including the share buyback, will be the equivalent of 12 percent of EADS’ share capital.

“We are making a big leap forward in terms of governance, actually the most important change since the creation of our company more than 12 years ago,” EADS Chief Executive Tom Enders said.

“Strategy and industrial projects in the future will be solely defined and decided by the board of directors and the executive team, the operations will be managed without any outside interference from specific shareholders or shareholder concerts,” Enders said.

An extraordinary shareholders meeting will be held in the first half of 2013 to adopt the shareholders plan, buy-back and elect directors, on condition Germany, through the KfW bank, buys a 5 percent stake, the company said.

France will renounce votes on 3 percent of its 15 percent block of shares by “warehousing” the stock in the Netherlands, press reports said. That brings its control to equal that of Germany’s stake.

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