EADS CHIEF executive Tom Enders and BAE Systems counterpart Ian King have launched a charm offensive to convince investors to back a $48 billion (€36.5 billion) merger to create a global aerospace and defence giant.
“Don’t panic” has been the message from the two men after shares in both companies dropped on Thursday, with investors questioning the logic of combining the two companies.
In conference calls with BAE and EADS management, several top investors expressed unease over a lack of detail on cost savings, political involvement in a combined group and – crucially – its long-term dividend policy.
“What investors want is more details on the dividend policy, especially because BAE provided them high returns over years,” said one source close to the talks.
“They also want more details on where the synergies will come from and how big they will be.”
The fact news of merger talks leaked earlier this week, causing the pair to issue a hastily compiled statement, prevented the two companies from telling shareholders the full story, according to the same source. They are under pressure from investors to come up with a full merger plan, but that will first need approval from the companies’ government backers.
Britain’s strict takeover rules limit what they can say to reassure investors in private, a second source close to the talks said.
The commitment to give EADS shareholders £200 million (€247.3 million) as a special dividend should be seen as a sign that the combined group’s future dividend policy would be in line with BAE’s, the source said.
“Shareholders will be positively surprised,” this source said. Mr King has urged investors to stay calm and has promised “positive surprises” from the proposed deal. Mr Enders has been pushing the message that a combined group could absorb the cyclical ups and downs in the global defence and aerospace markets.
EADS aircraft unit Airbus is booming, backed up with orders from emerging nations in Asia. BAE is bracing itself for more cuts in defence budgets in the US and Britain. Some EADS shareholders, reaping the rewards of the investment in Airbus, are angry the benefits could be shared with shareholders of BAE. – (Reuters)
