December 5, 2012 6:51 pm

EADS shakes up shareholder pact

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EADS on Wednesday outlined the biggest shake-up to its corporate governance since the company’s creation in 2000, in changes aimed at providing Berlin with equivalent influence to Paris at the aerospace and defence group.

The French, German and Spanish governments have agreed to reduce the amount of influence they wield over EADS and its shares.

But lawyers said the proposed changes – by providing Paris, Berlin and Madrid with direct stakes that add up to 28 per cent of EADS shares – were likely to ensure the governments constituted a blocking minority on key votes at the company’s annual meetings.

Tom Enders, EADS chief executive, who has pushed to reduce the amount of political meddling in the company, said the governance reform was the “most important change”.

“Strategy and industrial projects in the future will be solely defined and decided by the board of directors and the executive team,” he added.

The changes to the EADS shareholder structure have been spurred by the wish of Daimler, the German car maker, and Lagardere, the French media group, to sell their stakes in the aerospace company.

It also emerged during the failed attempt this October by EADS to combine with BAE Systems that Berlin wanted an equal position to Paris at the aerospace company, which owns Airbus.

Under the proposed changes, Berlin is due to become a direct shareholder in EADS for the first time, which means the level of state ownership at the company would increase.

The French and German governments are expected to each have a 12 per cent stake in EADS. The Spanish government would have a 4 per cent stake.

Currently, Paris has a 15 per cent stake in EADS, which is tied to Lagardere’s 7.5 per cent shareholding in the aerospace company.

Daimler exercises control over 22.5 per cent of EADS’ voting shares, and this block has served as a proxy for Berlin. The Spanish government has a 5.5 per cent stake.

A shareholder pact involving Daimler, Paris and Lagardere means that the French and German governments currently wield de facto control over EADS through several veto rights.

This pact will be replaced by a smaller one that affords fewer veto rights to the three governments. They include the ability to block a hostile takeover.

All the changes must be approved by a special shareholder meeting next year, and EADS is planning to buy back 15 per cent of its shares to cushion the impact of Daimler and Lagardere selling their stakes.

Sensitive French and German defence assets that EADS is involved in will be ring-fenced in special subsidiaries.

A statement from Francois Hollande, French president, stressed that all sides had agreed that the EADS operational headquarters would remain in Toulouse, but did not address why France was reducing its stake in the company.

Angela Merkel, German chancellor, welcomed the “new shareholder partnership” at EADS, saying the country’s strategic interests would be protected.

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