(Adds EADS and TCI comments, background)
PARIS Aug 5 Activist hedge fund TCI has written
to EADS' chief executive demanding the aerospace
company sell its stake in Dassault Aviation, maker of
the Rafale fighter jet, saying the 4 billion euro ($5.3 billion)
holding was "a poor use of capital" and the proceeds should be
given to shareholders.
The move is the first time a shareholder has questioned the
group's strategy since its corporate governance change in April
and shows how EADS is increasingly facing market pressures. But
it also makes clear the limits to its claim to be a normal
company that takes independent decisions.
EADS has an agreement to "warehouse" the Dassault stake,
which it inherited from Aerospatiale - the French state company
that helped found EADS in 2000 - on behalf of the French
So far there has been no indication that the French
government would be prepared to end the arrangement with EADS.
No one at the French finance ministry was immediately
available to comment.
In a letter sent to Tom Enders on Friday, which has been
seen by Reuters, TCI said EADS' 46 percent stake provided "no
synergies" and had "limited strategic value" to the group, which
plans to combine its defence and space units and take the name
of its flagship brand Airbus.
TCI, which holds more than 1 percent of EADS' share capital,
said the stake should be sold either via a trade sale or public
offering, suggesting proceeds should be used to buy back shares
or pay a special dividend.
"TCI is a shareholder and we recognise that they have
communicated their views, which is their right as a
shareholder," an EADS spokesman said in an emailed statement to
Reuters. "We will keep shareholders fully appraised of our plans
and progress," he added.
The Financial Times cited a person close to the French group
saying that senior management was likely to be sympathetic to
TCI, but a shareholder pact with the French government, which
controls 12 percent of EADS, meant EADS would not be free to
Even though the French government no longer has a veto over
EADS' strategy, it still has a final say over what EADS does
with its Dassault stake.
TCI partner Ben Walker told Reuters that the fund had not
spoken to other shareholders about the matter, but added that
they were likely agree with its letter.
"EADS will clearly need the permission of the French
government to sell the stake. We want to get all parties to
table to reach a decision," he said. "The consolidation of the
French defence industry is long overdue."
In a conference call with analysts last week, Enders said
the group would look into its minority stakes as it prepares to
combine its defence and space units.
"But this strategy will be executed where we can execute it,
we'll not make announcements upfront," he said. "
After a decade of Franco-German control under a pact between
France and two industrial partners, French media group Lagardere
and German carmaker Daimler, EADS changed
its corporate governance in April to allow the industrial
shareholders to exit and the German government to take part of
The structure has boosted the free-market float from 50
percent to 70 percent of the shares and has capped the combined
French, German and Spanish government stakes at 28 percent -
below the 30 percent threshold for triggering a mandatory bid.
EADS shares were trading 0.3 percent lower at 0936 GMT, in
line with the CAC40 blue chip index.
Headed by Chris Copper-Hohn, media-shy TCI is one of the
best-known activist hedge funds and has a record of rallying
other shareholders behind its campaigns to shake up a company's
It hit the headlines in 2007 for its role in the sale of
Dutch bank ABN Amro, and among the high-profile executive scalps
it has claimed were Deutsche Boerse's then chairman and CEO
following a row about its bid for the London Stock Exchange.
However, not all its efforts have been so successful. TCI
suffered a bruising in 2008 when it ran into trouble in a tussle
with Japanese electricity firm J-Power, losing a reported $130
million and dragging its main fund to a 40 percent loss.
More recently, TCI's performance has rebounded. Recent
targets include French aerospace group Safran, which it
told last October to stop making "value destructive"
acquisitions and return cash to shareholders instead.
Last year it also agitated for change at Coal India, where
it challenged the Indian government, the firm's largest
shareholder, for putting pressure on the company to sell assets
at below-market prices and exercising excessive control over
strategy and growth plans.
($1 = 0.7528 euros)
(Reporting by Cyril Altmeyer and Elena Berton; Additional
reporting by Tim Hepher in Paris, Laurence Fletcher and Tommy
Wilkes in London; Editing by David Holmes and Giles Elgood)