BAE Systems Orders New Airbus Audit

By Marcel Michelson and Jason Neely Posted 05 July 2006 @ 06:45 pm EET     Print     Reprint     E-Mail     Comments

LONDON (Reuters) - Britain's BAE Systems ordered an audit of Airbus on Wednesday, pushing back its possible sale of a 20-percent stake in the European planemaker into September at the earliest.

BAE was set to sell the stake to 80-percent owner EADS using a put option but a lower-than-expected valuation of 2.75 billion euros ($3.52 billion) on the stake by investment bank Rothschild, brought in to arbitrate between the two sides, threatens to put the sale on hold.

"BAE Systems expects that the audit will assist its board in assessing whether or not to recommend that its shareholders vote in favor of the proposed disposal," BAE said in a statement.

"This underlines we are committed to do what is best for our shareholders," a spokeswoman said.

BAE said the audit would be carried out by an independent party and not its own auditor, KPMG, and was in accordance with its agreements with EADS and Airbus.

It declined to name the auditor and said its results would not be completed before the end of August.

BAE said on Tuesday it expected quick resolution of the possible sale, plans for which were announced in April.

Analysts expect BAE, if it sells, to use the proceeds for fresh acquisitions in the defense sector, with the U.S. market high on the agenda.

The valuation by Rothschild announced on Sunday was well below analysts' forecasts of as much as 5 billion euros, and also below the 3.5 billion euro fair value price the stake carries on EADS's consolidated balance sheet

EADS, Europe's biggest aerospace firm, declined to comment.BAE holds a put option, giving it the right to sell its stake to EADS.

The Franco-German-Spanish firm has the right of first refusal and has said it is willing to buy, meaning BAE cannot sell the stake to someone else.

If BAE holds on, it cannot exercise the put option again until next May at the earliest, which is when an annual window next opens.

At 1054 GMT, BAE shares were down 1.9 percent at 348-3/4 pence. EADS shares in Paris were down 3.8 percent at 20.6 euros.