BAE says Airbus stake value set at €2.75 billion

LONDON/PARIS - BAE Systems has announced that investment bank Rothschild has set a price of €2.75 billion ($5.78 billion) for a 20 per cent stake in planemaker Airbus it plans to sell to EADS.

"Having received the determination of the price, the Board of BAE Systems will now consider its recommendation to shareholders regarding the proposed disposal," BAE said in a news release.

It said details regarding the proposed disposal would soon be sent in a circular to BAE shareholders.

BAE said its net proceeds after offsetting outstanding loans between BAE and Airbus and transaction costs would be approximately €1.65 billion.

EADS said in a separate statement it planned to pay in cash.

Under an Airbus shareholders agreement signed by the two firms, Rothschild was brought in to arbitrate after the two sides failed to agree on a value for the stake.

Recent media reports had estimated the stake would be worth about 5 billion euros, though some analysts had said a recent fall in EADS shares threatened to lower that value.

Last month's fresh delay in the Airbus A380 superjumbo triggered a profit warning at EADS and a sharp fall in its shares, the price of which was used to help set the value of BAE's Airbus stake.

Analysts said other factors taken into account when evaluating the stake's value were Airbus' growth potential and the long-term performance of EADS and BAE shares as well as their global aerospace peers.

BAE is Europe's largest defence firm and is expected to use proceeds from the sale for fresh acquisitions, including in the United States.

BAE is getting out of Airbus as the France-based planemaker faces the challenges of finishing the A380 double-decker, finding buyers for it and pushing on with development of a mid-sized model to battle surging rival Boeing Co.'s 787 due in 2008.

Airbus has pledged to reveal the new mid-sized model design this month after several false starts.

- REUTERS