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BAE agrees to £1.87bn Airbus sale BAE agrees to £1.87bn Airbus sale
(about 12 hours later)
UK-based defence firm BAE Systems has agreed to sell its 20% stake in plane maker Airbus to EADS for 2.75bn euros (£1.87bn; $3.53bn).UK-based defence firm BAE Systems has agreed to sell its 20% stake in plane maker Airbus to EADS for 2.75bn euros (£1.87bn; $3.53bn).
BAE estimates the sale will generate about £1.2bn net, allowing it to return about £500m to shareholders.
If shareholders agree to the deal, pan-European EADS, which owns 80% of Airbus, will own the firm outright.If shareholders agree to the deal, pan-European EADS, which owns 80% of Airbus, will own the firm outright.
The 13,000 Airbus workers in the UK - where the planes' wings are built - are not thought to be affected by the deal.The 13,000 Airbus workers in the UK - where the planes' wings are built - are not thought to be affected by the deal.
"The board believes that Airbus is facing a challenging short to medium-term outlook," BAE said."The board believes that Airbus is facing a challenging short to medium-term outlook," BAE said.
The firm can sell its 20% stake after a 2001 deal it signed with Franco-German EADS. BAE can sell its 20% stake after a 2001 deal it signed with Franco-German EADS.
BAE's decision comes after an independent audit by Rothschild, which valued Toulouse-based Airbus at £1.9bn. It estimates the sale of the stake - which has to be approved by BAE shareholders - will generate net proceeds of about £1.2bn. It will then return about £500m to shareholders.
BAE said it thought "a significant amount of management focus, time and investment would be required to address the issues currently facing Airbus". Airbus troubles
Delays BAE first said in April this year that it was thinking of selling its stake in Airbus.
The company said if the sale does not go ahead "it may be necessary to retain BAE Systems' interest in Airbus for an extended period to be confident that it could be sold for materially more than [the current price]" After BAE and EADS failed to reach agreement on a price for the sale, investment bank Rothschild was brought in to value the stake.
Reports have suggested BAE had hoped to earn more by selling its share in Airbus. Its estimate of the stake's value at about £1.9bn was much lower than analysts' expectations of £3bn-£4bn.
Back in April BAE Systems first said it was thinking of withdrawing from the pan-European aircraft-maker. Airbus has had a difficult year, announcing in June that deliveries of its new A380 plane would be delayed following problems with wiring.
But when BAE and EADS failed to reach agreement on a price for the sale, Rothschild was engaged to value Airbus. In a statement, BAE said it thought "a significant amount of management focus, time and investment would be required to address the issues currently facing Airbus".
Since then however, Airbus has seen development of its new Airbus A380 super-jumbo suffer delays. BAE chief executive Mike Turner told the BBC that the time was right to sell.
Shares in BAE fell 0.92% to 377.5 pence while shares in EADS dropped 1.13% to 22.79 euros. "In the long term Airbus will do very well. Cleary it has issues today but I see them as quite temporary," he said.
The deal remains to be approved by BAE shareholders. "It needs to keep costs down because of the weakness of the dollar and has got to find money to invest in the new family of aircraft. Also Boeing has re-entered the market with a vengeance and a very good product."