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BREAKINGVIEWS-EADS' governance rejig falls short of true reform

Source: Thomson Reuters Foundation - Thu, 6 Dec 2012 12:39 GMT
Author: Reuters
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By Pierre Brian?on

LONDON, Dec 6 (Reuters Breakingviews) - Tom Enders has managed to snatch a little victory from the jaws of industrial defeat. The chief executive of EADS, the pan-European aerospace group, has used the failure of his planned merger with the UK's BAE to convince the French and German governments that his company needs a governance overhaul.

This was long overdue. An out-dated and self-defeating shareholders pact mixing public and private interests will now disappear. And state meddling will, in theory at least, be confined to the area where it is acceptable and unavoidable - the company's defence business. But the overhaul falls short of the true reform that EADS would need to function like a normal company.

At some point near the end of next year Daimler and Lagard?re will have exited EADS, while the French and German government will each own no more than 12 percent, with Spain holding 4 percent. Furthermore, the new shareholder pact linking the three countries will be more limited in scope than the previous cumbersome agreement that dated back to EADS' creation in 1999.

Investors sent EADS shares soaring more than 7 percent on the news. This may be surprising in light of the facts that German government will take a direct stake in the group, while the two private shareholders, media publisher Lagard?re and carmaker Daimler will sell their shares. But the reason the markets cheered is that EADS is buying back 15 percent of its stock - half of which being the Lagard?re stake.

The French and German governments will retain the ability to make a nuisance of themselves whenever they feel that their joint or separate interests are threatened. Angela Merkel, who scuppered the EADS-BAE merger earlier this year for obscure reasons that may have had something to do with fear of job losses, would still have the capacity to say "nein" to such a deal.

At least, with the free float to increase to more than 70 percent of the shares, EADS is on track to have real, interested shareholders - not reluctant ones like Lagard?re and Daimler. But the company won't be free until Paris and Berlin reduce their stakes further and decide - once and for all - that the only part of EADS where their opinion matters is in defence.

CONTEXT NEWS

- Shares in EADS, the pan-European aerospace company, rose 7 percent Dec. 6 on the news that the company had agreed on an overhaul of its shareholding structure.

- France and Germany agreed to control 12 percent each of the voting rights, handing Berlin a direct stake in the Airbus parent company for the first time. Spain will also have a slightly reduced stake of around 4 percent.

- Until now, parity in EADS - born from a merger of French, German and Spanish interests - had been ensured through a shareholder pact between the French state, French media firm Lagardere and German car firm Daimler AG.

- As a result of the changes, Lagardere and Daimler will gradually unwind their stakes in the Airbus maker.

- Reuters: Shareholders clinch pact to overhaul EADS ownership

- For previous columns by the author, Reuters customers can click on

(Editing by Robert Cole and David Evans)

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