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Friday, February 18, 2011

Daimler Plans To Reduce EADS Stake

Industry leaders and economic policy makers plan to meet Germany’s Chancellor Angela Merkel next Wednesday in an effort to find out who could pick up part of the Daimler AG shareholding in EADS.
The German carmaker plans to reduce its stake in EADS further, according to comments made by CEO Dieter Zetsche and CFO Bodo Uebber. Zetsche stated on the sidelines of Daimler’s annual press conference that a change in the EADS shareholder structure was possible. Uebber added that Daimler wants to keep “industrial leadership.”
According to industry sources, Daimler would like to reduce its EADS stake from the current 15% to 7.5%, the minimum required to stay within the frame of the current shareholder agreement. The 7.5% would have to be bought by an as yet unknown entity that would be willing to transfer its voting rights to Daimler—presumably in return for financial incentives. The plan also assumes that a consortium of mostly German banks (Daedalus) will extend its agreement to hold a further 7.5% that Daimler has already sold. That deal expires by the end of 2012 and banks have already indicated they are not interested in extending it further.
The key question is: who could step in for Daimler? So far, the most likely outcome seems to be for state development bank KfW to set up another consortium. The federal government is understood to have asked major corporations such as Siemens or BMW if they were interested, but has been turned down. With no industrial shareholder in sight, even German states such as Bavaria or the City of Hamburg are considering to step in. They have many EADS and Airbus sites and are concerned that jobs might be lost if German influence on EADS diminishes.
Sources close to Daimler say that the planned leadership transfer at EADS next year needs to be protected at all costs. CEO Louis Gallois—who will retire in mid-2011—is to be replaced by a German successor, most likely Thomas Enders while Fabrice Brégier is expected to become CEO of Airbus.
With Enders now in a strong position vis-à-vis his German backers, several industry sources believe he will come up with strong demands for structural reform before he agrees to take the job. Enders has long lobbied for more integration and a stronger central governing body—the EADS executive board that would have more say in daily operations even in the business units. However, such demands would likely hit resistance by French shareholders, Lagardére and the government.
Both Daimler and the French government currently hold 15% in EADS while Lagardère and the Daedalus banking consortium have 7.5%. Lagardère has also indicated it would like to sell its stake to focus on its media business.

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