UPDATE 1-EADS adopts 3.75 bln euro share buyback

Tue Apr 2, 2013 1:41pm EDT

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PARIS, April 2 (Reuters) - European aerospace group EADS announced a share buyback worth up to 3.75 billion euros ($4.81 billion) on Tuesday to dampen sales by a dismantled group of core shareholders, following a radical shake-up of its structure.

The buyback, to be carried out over 18 months, is equivalent to around 11 percent of the value of the Airbus parent group based on Tuesday's near-record closing price of its shares, which have been rising in anticipation of the overhaul.

As part of changes intended to make the Franco-German-led company more market-friendly, EADS is buying back shares to prevent an overhang of stock released by French media group Lagardere and German car firm Daimler.

Details of the buyback emerged after EADS formally completed the switch to a new structure on Tuesday and confirmed Denis Ranque, the former head of French defence firm Thales, as chairman of a newly independent board.

He replaces Arnaud Lagardere, who stepped down as his group prepares to leave the aerospace firm it helped create in 2000.

Until now, EADS has been controlled by a pact between French and German interests led by Lagardere, the French government and Daimler. Under the new system, France, Germany and Spain will hold stakes but see their powers curtailed.

The operation is expected to be split equally between the public and an allocation for core shareholders, earmarked almost exclusively for Lagardere.

The system of two tranches gives Lagardere an exit path after it agreed to let its German opposite number in EADS, carmaker Daimler, start unwinding positions earlier.

The buyback is expected to be financed by cash available on the balance sheet and will boost earnings per share, EADS said. Repurchased shares will be cancelled.

The group's net cash stood at 12.2 billion euros at the end of 2012.

The buyback will be carried out at a maximum price of 50 euros a share. The stock closed 3.6 percent higher at 41.115 euros on Tuesday.

EADS first announced plans to buy back up to 15 percent of its shares in December, but the cost of such an exercise has risen sharply as EADS shares gained more than a third this year, propelled by civil demand and news of the buyback itself.

Chief Executive Tom Enders last week appeared to set a ceiling of 4 billion euros or 12 percent of EADS stock on the operation when he told shareholders he would not advocate spending more than a third of the company's net cash.

In a statement on Tuesday, Enders said the buyback would maintain the company's "strategic flexibility and a sound balance sheet".

The buyback will mop up about two thirds of an overhang of shares created by changes of ownership, with Lagardere and Daimler preparing to sell 7.5 percent of EADS each and Spain expected to sell 1.15 percent by April 9.

Analysts say the sales by the outgoing shareholders could weigh on EADS share prices in the short term. But investors have broadly welcomed limits on state interference and a sharp rise in the proportion of freely traded shares from 50 to 72 percent.

Daimler intends to sell its remaining 7.5 percent in the second half of the year, a source familiar with the matter told Reuters last week.

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