2ND DaimlerChrysler sells EADS stake to German states

dpa German Press Agency Published: Friday February 9, 2007

Stuttgart- German banks and state governments have bought 7.5 per cent of European aerospace group EADS from DaimlerChrysler, but the carmaker said Friday it would continue to exercise 22.5 per cent of voting rights as before. Five states and the German federal government have been in months of negotiations to buy the stake so that they can exert influence to stop Airbus from pruning back aircraft factories on German soil as it struggles with a financial crisis caused by its big A-380 jet.

German government sources said the acquisition was designed to give a three-year breathing space while Berlin was seeking a strategic investor.

Investors welcomed the cash-out by the carmaker - Germany's biggest industrial company.

DaimlerChrysler stock closed in Frankfurt at 49.55 euros, a gain of 3 per cent for the day.

Berlin spokesman Ulrich Wilhelm said Germany was now in a better position in the "difficult" approaching negotiations on an Airbus cost-cutting drive code-named "Power 8."

He added that Chancellor Angela Merkel's government did not expect any obstruction by EU competition watchdogs. Merkel had consulted with French Prime Minister Dominique de Villepin about the deal.

Berlin had an option to buy out the entire 7.5-per-cent stake in 2010 if DaimlerChrysler opted to sell it, he added.

France and Germany are exactly balanced within EADS (European Aeronautic Defence and Space Company) and Airbus, with French conglomerate Lagardere managing a 22.5-per-cent stake held by investment vehicle Sogeade, in which the French state has placed its equity.

Mirroring this arrangement, Stuttgart-based DaimlerChrysler has transferred its entire 22.5-per-cent equity interest in EADS to a new company where the carmaker will be in charge with two-thirds of the votes.

Berlin and the governments of Hamburg, Lower Saxony, Bavaria, Baden-Wuerttemberg and Bremen acquired shares via state banks. Private sector investors Allianz, Commerzbank, Credit Suisse, Deutsche Bank and Goldman Sachs provided 60 per cent of the funding.

The automaker obtained 1.5 billion euros (nearly 2 billion dollars) for the stake, less than the 2 billion euros it gained from selling a previous 7.5-per-cent stake before the A-380 problems emerged. Delivery of the jets is late because of bad organization.

DaimlerChrysler said it possessed an option to dissolve the new structure on July 1, 2010 at the earliest and either compensate the new investors with EADS shares or pay them off in cash.

EADS stock is listed on the Amsterdam Stock Exchange. A Spanish state company, SEPI, holds an additional 5.5 per cent.

© 2006 dpa German Press Agency