August 10, 2011 7:07 pm

EADS on €11bn prowl for bolt-on businesses

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EADS is looking to make more acquisitions as it seeks to put its €11bn ($15.6bn) of net cash to work and rebalance its portfolio, says the chief financial officer of the European aerospace and defence company.

“We can certainly do a number of additional bolt-on acquisitions,” Hans-Peter Ring said at a conference in New York on Wednesday. “But we would also look at bigger targets than we bought in the first half.”

Already this year EADS, which owns aircraft maker Airbus, has agreed more than $1bn worth of deals, scooping up four businesses including a European satellite communications provider and a Canadian helicopter repair company.

The company has been buoyed by strong global demand for aircraft. It expects to see a rapid improvement in profitability from 2012 as volumes pick up and the impact of cost overruns on high profile projects begins to recede. Mr Ring said EADS was still screening further potential assets but added that the company would be cautious given the volatile markets.

Senior executives have acknowledged that larger US defence and security deals may be more difficult for EADS given its Franco-German background and its complex shareholder structure which includes substantial government stakes.

EADS has long sought to more closely mimic arch-rival Boeing, by building up stable revenues from services and defence to offset the highly cyclical nature of its core aircraft unit.

In the first half of the year, sales of Airbus commercial aircraft made up more than 65 per cent of EADS’s total revenues of about €22bn.

The company would also like to increase its US presence to help reduce some of the currency risk that comes from using euros to make aircraft in Europe while selling jets in dollars – the global currency for the sector.

EADS spends more that $10bn a year on parts and services in the US, giving it a hedge against foreign exchange fluctuations, but that leaves it with about $20bn of exposure. EADS is targeting $10bn in non-Airbus revenues from North America by 2020, up from $5bn in 2010, but Mr Ring said it would probably have to make acquisitions to hit that goal.

He added that EADS was also working to identify European and Middle Eastern customers who might be prepared to buy aircraft in euros as well as pushing its suppliers to move to dollar-zone countries.

Additional reporting by James Boxell in Paris

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