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Last Updated: Wednesday, 7 June 2006, 15:44 GMT 16:44 UK
BAE moves to force Airbus sale
A350
Airbus is battling rival Boeing to be the biggest commercial planemaker
BAE Systems has said it will exercise its put option in order to sell its 20% stake in aeroplane firm Airbus.

The move comes after BAE and EADS, which owns 80% of Airbus, failed to reach agreement on the price.

This means that investment banks for the two firms will have two weeks to negotiate the deal. If they fail, an independent bank will set the price.

The Airbus stake is worth 3bn-4.5bn ($5.3bn-$8.4bn), analysts have said.

A "put" option gives a party the right to sell something to a second party, often within a certain period of time.

In this case, it means that EADS, the Franco-German firm which includes both commercial and military aviation, is obliged to buy BAE's Airbus stake.

Trigger point

The "put" option is part of a shareholders' agreement which was drawn up in 2001.

Under the terms of the deal, BAE can call in independent negotiators - in this case, one merchant bank that has been chosen by BAE and EADS - to agree on a sale price for the Airbus stake.

A spokesman for BAE said that the agreement ensured that the stake could be sold in a timely manner.

AIRBUS KEY FACTS
The first ever Airbus, an A300, took off in October 1974
British Aerospace joined the consortium in 1979
There are over 3,900 Airbus jets in service
Airbus employs a total of 55,000 staff Worldwide
Airbus turnover in 2005 was 15.3bn

Analysts said that BAE may be looking to invest more money in its fast-growing US operations, where it produces 35% of its sales.

BAE said that it was looking to maximise its investment in Airbus in the best interests of shareholders.

Despite a bumper year for Airbus sales in 2005, profits at BAE's commercial aerospace division fell to 179m from 201m a year earlier.

BAE's move towards concentrating on its defence operations was reflected by last year's acquisition of US firm United Defense for 2.1bn.

EADS, based in Amsterdam, has sales of 34bn euros (23.5bn, $43.7bn) and 113,000 employees. As well as Airbus commercial jets, it makes helicopters, the Eurofighter, the A400 military transport, and the Ariane rocket.


SEE ALSO:
BAE mulls speeding up Airbus sale
02 May 06 |  Business
BAE confirms possible Airbus sale
07 Apr 06 |  Business
BAE Systems to sell Airbus stake
06 Apr 06 |  Business
Airbus helps lift profits at BAE
23 Feb 06 |  Business
BAE sells Prestwick unit for 80m
31 Jan 06 |  Scotland


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