3rd Jul 2006 07:00
BAE SYSTEMS PLC02 July 2006 BAE SYSTEMS PLC 2 July 2006 Not for release, publication or distribution in or into the United States, Canada, Australia, Japan or the Republic of Ireland. BAE SYSTEMS PLC PROPOSED DISPOSAL OF ITS AIRBUS SHAREHOLDING BAE Systems plc ("BAE Systems" or the "Company") announces that the price (the "Price") payable by European Aeronautic Defence and Space Company EADS N.V. ("EADS") in relation to the proposed disposal of BAE Systems' entire interest inAirbus S.A.S. ("Airbus") (the "Proposed Disposal") has today been determined byan independent expert to be €2,750 million (£1,903 million(1)). Summary: • Aggregate consideration for the Company's 20 per cent. interest in Airbus of €2,750 million (£1,903 million) • Net proceeds to BAE Systems, after offsetting outstanding loans between BAE Systems and Airbus and transaction costs, of approximately €1,650 million (£1,142 million) • Price determined by the independent expert appointed in accordance with the terms of the shareholders' agreement between BAE Systems, EADS and Airbus • Proposed Disposal subject to the approval of BAE Systems' shareholders • Having received the determination of the Price, the Board of BAE Systems will now consider its recommendation to shareholders regarding the Proposed Disposal • Further details regarding the Proposed Disposal will be set out in a circular to be sent to BAE Systems' shareholders shortly This summary should be read in conjunction with the full text of thisannouncement. Enquiries: BAE SystemsAndy Wrathall (Investor relations) Tel: +44 1252 383 820John Neilson (Media relations) Tel: +44 1252 384 795 Goldman Sachs International (Financial adviser to BAE Systems)Simon Dingemans Tel: +44 20 7774 1000Dominic Lee Gleacher Shacklock LLP (Financial adviser to BAE Systems)Tim Shacklock Tel: +44 20 7484 1150James Dawson This announcement is for information purposes only and does not constitute anoffer or invitation to acquire or dispose of any securities or investment advicein any jurisdiction. Goldman Sachs International, which is authorised and regulated by the FinancialServices Authority, is acting exclusively for BAE Systems in relation to thematters described in this announcement and is not advising any other person andaccordingly will not be responsible to any person other than BAE Systems forproviding the protections afforded to the customers of Goldman SachsInternational or for providing advice in relation to the matters described inthis announcement. Gleacher Shacklock LLP, which is authorised and regulated by the FinancialServices Authority, is acting exclusively for BAE Systems in relation to thematters described in this announcement and is not advising any other person andaccordingly will not be responsible to any person other than BAE Systems forproviding the protections afforded to the customers of Gleacher Shacklock LLP orfor providing advice in relation to the matters described in this announcement. This announcement includes 'forward-looking statements'. All statements otherthan statements of historical facts included in this announcement, including,without limitation, those regarding the Company's financial position, businessstrategy, plans and objectives of management for future operations areforward-looking statements. Such forward-looking statements involve known andunknown risks, uncertainties and other important factors which could cause theactual results, performance or achievements of the Company or the markets andeconomies in which the Company operates to be materially different from futureresults, performance or achievements expressed or implied by suchforward-looking statements. The Company cannot give any assurance that theProposed Disposal will be completed or that it will be completed on the termsdescribed in this announcement. This announcement is not an offer for sale within the United States of anysecurity of the Company. Securities of the Company, including its ordinaryshares, may not be offered or sold in the United States absent registrationunder the U.S. securities laws or unless exempt from registration under suchlaws. Not for release, publication or distribution in or into the United States, Canada, Australia, Japan or the Republic of Ireland. BAE SYSTEMS PLC PROPOSED DISPOSAL OF ITS AIRBUS SHAREHOLDING 1. Introduction BAE Systems plc ("BAE Systems" or the "Company") announces that the price (the "Price") payable by European Aeronautic Defence and Space Company EADS N.V. ("EADS") in relation to the proposed disposal of BAE Systems' entire interest inAirbus S.A.S. ("Airbus") (the "Proposed Disposal") has today been determined byan independent expert to be €2,750 million (£1,903 million(1)). Due to its size, the Proposed Disposal requires the approval of BAE Systems'shareholders at an extraordinary general meeting (the "Extraordinary GeneralMeeting"). Having received the determination of the Price, the Board of BAESystems will now consider its recommendation to shareholders, details of whichwill be set out in a circular (the "Circular") to be sent to shareholdersshortly. 2. Background to and Reasons for the Proposed Disposal BAE Systems' 20 per cent. shareholding in Airbus (the "Airbus Shareholding")represents a minority shareholding in a business over which BAE Systems does nothave full control. Furthermore, the Board of BAE Systems has determined thatthe Airbus Shareholding is non-core to the long-term development of BAE Systems.On 7 April 2006, BAE Systems therefore announced that it had entered intodiscussions with EADS regarding the disposal of its Airbus Shareholding. In accordance with the provisions of the shareholders' agreement dated 11 July2001 between EADS, BAE Systems and Airbus (the "Shareholders' Agreement"), BAESystems served upon EADS on 7 June 2006 a formal notice of exercise of its putoption requiring EADS to purchase the Airbus Shareholding on the terms set outin that agreement. On 20 June 2006, in accordance with the Shareholders'Agreement, BAE Systems and EADS appointed N M Rothschild & Sons Ltd andRothschild & Cie (together, "Rothschild") to act as an independent expert forthe purposes of determining the Price. Rothschild today informed BAE Systemsand EADS of its determination of the Price. 3. Information on Airbus Airbus is a leading manufacturer of commercial aircraft. The Airbus productline includes a comprehensive range of passenger aircraft models, from the100-seat, single-aisle A318 jetliner to the new, long-range 555 (or more) seatA380. In addition to commercial jet airliners, Airbus produces freighteraircraft and is developing the A400M military transport aircraft. The Airbus Shareholding represents 20 per cent. of Airbus' ordinary issued sharecapital. The remaining 80 per cent. of Airbus' ordinary issued share capital isowned by EADS. Airbus has no other shareholders. For the year ended 31 December 2005, BAE Systems' 20 per cent. share in Airbusgenerated profits before taxation of £254 million on sales of £3,002 million.As at 31 December 2005, BAE Systems' 20 per cent. share in Airbus represented anamount of net assets of £110 million and gross assets (including goodwill) of£5,847 million. On 13 June 2006, Airbus announced that the delivery schedule for the A380programme would undergo a delay of six or seven months due to production ramp-upissues, which are likely to limit aircraft deliveries to nine in 2007 and resultin further delivery shortfalls in 2008 and 2009. Airbus stated that thesedelays were caused by industrial issues, which are mainly traceable tobottlenecks formed in the definition, manufacture and installation of electricalsystems and resulting harnesses. 4. Principal Terms of the Proposed Disposal The Proposed Disposal would be structured as the sale by BAE Systems to EADS ofBAE Systems France (Holdings) S.A.S., a wholly owned subsidiary of BAE Systemsand the entity that holds its 20 per cent. shareholding in Airbus. Under the terms of the Shareholders' Agreement, the form of the aggregateconsideration to be paid by EADS to BAE Systems will be determined by EADS priorto completion of the Proposed Disposal. EADS can elect to satisfy the aggregateconsideration in cash, by an allotment of shares in EADS to BAE Systems, or by amixture of cash and EADS shares. In the event that EADS were to elect tosatisfy part or all of the consideration by an allotment of EADS shares, thenumber of shares is to be determined on the basis of the average closing midmarket price of EADS over the period of ten trading days prior to completion ofthe Proposed Disposal. Depending on prevailing market conditions, BAE Systemswill seek to sell any EADS shares received as part of the consideration for theProposed Disposal as soon as it deems the sale both practicable and attractivefor the Company. The Proposed Disposal is conditional upon the approval of BAE Systems'shareholders at the Extraordinary General Meeting. If BAE Systems shareholderapproval for the Proposed Disposal is obtained, completion of the transactionwill take place not later than ten days after the date of receipt of suchapproval. 5. Financial Effects of the Proposed Disposal and Use of Proceeds Although the Proposed Disposal would result in significant near-term earningsdilution, it would strengthen BAE Systems' financial position. The ProposedDisposal would also enable BAE Systems management to focus on the Company's coredefence and aerospace businesses, which it believes offer good prospects forgrowth both organically and through selective acquisitions. The aggregate consideration for BAE Systems' 20 per cent. shareholding in Airbusis €2,750 million (£1,903 million). Following repayment of debts outstandingbetween BAE Systems and Airbus at completion and the payment of transactionrelated costs, net proceeds to BAE Systems are estimated to be approximately€1,650 million (£1,142 million). It is anticipated that there would be no material taxation payable on theProposed Disposal, although this would require formal clearance from HM Revenue& Customs. It is expected that the Circular will contain additional information regardingthe use of proceeds in the event that BAE Systems shareholder approval for theProposed Disposal is obtained. 6. Management and Employees So as to provide continuity of pension rights, it is intended that the Airbus UKemployees would remain in the BAE Systems group pension plans and that thecontributions for both employees and Airbus UK would remain unchanged. Thesearrangements are the subject of continuing discussions between BAE Systems andEADS. BAE Systems also understands that EADS has reiterated its strongcommitment to Airbus' UK operations and the sites at Broughton and Filton. 7. Extraordinary General Meeting and Shareholder Approval The Proposed Disposal will be subject to the approval of BAE Systems'shareholders at the Extraordinary General Meeting. The Circular containingfurther details of the Proposed Disposal and setting out the notice of theExtraordinary General Meeting will be sent to BAE Systems' shareholders shortly. Enquiries: BAE SystemsAndy Wrathall (Investor relations) Tel: +44 1252 383 820John Neilson (Media relations) Tel: +44 1252 384 795 Goldman Sachs International (Financial adviser to BAE Systems)Simon Dingemans Tel: +44 20 7774 1000Dominic Lee Gleacher Shacklock LLP (Financial adviser to BAE Systems)Tim Shacklock Tel: +44 20 7484 1150James Dawson This announcement is for information purposes only and does not constitute anoffer or invitation to acquire or dispose of any securities or investment advicein any jurisdiction. Goldman Sachs International, which is authorised and regulated by the FinancialServices Authority, is acting exclusively for BAE Systems in relation to thematters described in this announcement and is not advising any other person andaccordingly will not be responsible to any person other than BAE Systems forproviding the protections afforded to the customers of Goldman SachsInternational or for providing advice in relation to the matters described inthis announcement. Gleacher Shacklock LLP, which is authorised and regulated by the FinancialServices Authority, is acting exclusively for BAE Systems in relation to thematters described in this announcement and is not advising any other person andaccordingly will not be responsible to any person other than BAE Systems forproviding the protections afforded to the customers of Gleacher Shacklock LLP orfor providing advice in relation to the matters described in this announcement. This announcement includes 'forward-looking statements'. All statements otherthan statements of historical facts included in this announcement, including,without limitation, those regarding the Company's financial position, businessstrategy, plans and objectives of management for future operations areforward-looking statements. Such forward-looking statements involve known andunknown risks, uncertainties and other important factors which could cause theactual results, performance or achievements of the Company or the markets andeconomies in which the Company operates to be materially different from futureresults, performance or achievements expressed or implied by suchforward-looking statements. The Company cannot give any assurance that theProposed Disposal will be completed or that it will be completed on the termsdescribed in this announcement. This announcement is not an offer for sale within the United States of anysecurity of the Company. Securities of the Company, including its ordinaryshares, may not be offered or sold in the United States absent registrationunder the U.S. securities laws or unless exempt from registration under suchlaws. --------------------------------- Notes: (1) All figures in this announcement, excluding the historical information setout in Part 3, have been converted at an exchange rate of €1.445 = £1.000,unless otherwise stated. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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