EADS CEO says 1 billion euro M&A possible

EADS Chairman and CEO Louis Gallois speaks at 2010 Reuters Aerospace and Defense Summit 2010 in Washington, September 8, 2010.

WASHINGTON (Reuters) - EADS (EAD.PA) Chief Executive Louis Gallois said EADS is in talks with a few companies in defense, services and security areas for potential deals and could comfortably make an acquisition of around 1 billion euros.

Speaking at the Reuters Aerospace and Defense Summit in Washington, Gallois said the Airbus parent's cash position of 9 billion euros gives it room for "reasonable" acquisitions.

"We want to make acquisitions in three fields," Gallois told the summit, referring to defense, services and security industries. He said it was important not to move too slowly because some opportunities might be lost.

"We are screening a lot of companies to see what could be our targets," Gallois said, adding that its primary focus is to expand in the United States, which accounts for more than half of global defense spending.

"Too much of our footprint is in Europe. We have to be more present in other countries and the priority is clearly the United States, because it's the biggest market and the technology is here and our competitors are here," Gallois said.

Since its $350 million purchase of California security systems company PlantCML in April 2008, EADS had been on a broadly acquisition-free diet as it faced threats to its cash pile from penalties for aircraft delays and airline customer demands for financing.

EADS had also axed a second U.S. acquisition later in 2008 which its executives valued at around $1 billion.

Asked if any deal could potentially exceed 1 billion euros in value, he said: "One billion euros is certainly a figure we could reach." He added that the amount does not represent a limit or a target.

EADS' renewed attempt for deals comes as it aims to boost its North American revenue to $10 billion by 2020 from an expected $1.5 billion in 2010 and around $1.2 billion in 2009.

EADS, heavily reliant on commercial aerospace, also aims to boost sales from its defense, space and security division to 50 percent of total revenue by 2020, from 35 percent now, Gallois said.

"We want to balance our portfolio of activities in a better way ... I think we have to look at what Boeing has done," he said, adding that commercial airline business accounts for less than half of competitor Boeing Co's (BA.N) portfolio currently.

Gallois said EADS is not looking at a large-scale merger with a major defense contractor for now.

"We are not on track for that for the time being," he said.

EADS is among many defense contractors seeking acquisitions as the industry grapples with tighter budgets and changing priorities under the Obama administration to move resources from traditional weapons to cybersecurity and unmanned defense.

(Reporting by Soyoung Kim, Tim Hepher, Karen Jacobs, Andrea Shalal-Esa; Editing by Phil Berlowitz)