* German paper says France to sell 3 pct of EADS to Germany
* Daimler would sell 3 pct of shares on the market
* Moves overshadow blockbuster Airbus sale to China
* EADS shares fall 1.4 pct
By Julien Ponthus and Maria Sheahan
BRUSSELS/FRANKFURT, Nov 23 Accelerated efforts
by Germany and France to rearrange stakes in EADS
knocked shares in the Airbus parent on Friday as investors
fretted about surplus stock and state interference.
In the latest twist to rapidly unfolding events since merger
talks with BAE Systems collapsed last month, German
newspaper Handelsblatt reported France could sell 3 percent of
EADS to Germany to help bring Berlin on board as a shareholder.
That would force carmaker Daimler, which
represents German interests in Europe's largest aerospace group,
to sell 3 percent of EADS on the market to keep the
Franco-German balance intact while further changes are drawn up.
Shares in EADS fell 1.4 percent.
"The manoeuvering of the government shareholders, and the
overhang of a potentially significant secondary sale are no
doubt weighing on investor sentiment," RBC Capital Markets
analyst Rob Stallard said in a note.
The ownership structure of Europe's largest aerospace group
has been in the spotlight since the planned merger with BAE drew
a veto from Germany and sped up efforts by Berlin to play a more
direct role in EADS, matching France.
French President Francois Hollande confirmed France and
Germany had discussed the issue on the sidelines of a European
Union summit in Brussels on Friday, as reported by Reuters.
"We will need to review our respective shareholdings and
redefine the shareholder pact, and all that will happen in the
next few weeks," Hollande told a news conference.
EADS is jointly controlled by French and German interests
representing 45 percent of the votes contained in a shareholder
pact. Spain owns 5.5 percent but is not in the main pact.
Unlike in France, where the government owns 15 percent in
partnership with media firm Lagardere at 7.5 percent, Germany
exercises its interests solely through car firm Daimler, which
owns or controls 22.5 percent of the aerospace group.
Lagardere and Daimler both want to reduce their stakes.
The German government has evolved in the past year from
being an unwilling purchaser of last resort for Daimler's shares
to being an ardent potential buyer in order to safeguard its
interests in EADS, according to people familiar with the talks.
Germany has indicated it wants to match France's government
stake in EADS. But the two sides can only own 12 percent each to
avoid triggering a mandatory bid under takeover law in the
Netherlands, where EADS is registered.
Germany would top up its 12 percent stake by acquiring 7.5
percent from a bank consortium managed by Daimler and 1.5
percent from Daimler itself, Handelsblatt reported.
EADS declined to comment.
Ultimately, according to people familiar with the
discussions, Lagardere and Daimler would be free to exit
completely, leaving France and Germany with 12 percent each and
Spain at 5.5 percent - collectively just below the 30 percent
threshold for a mandatory bid under Dutch takeover law.
Although the industrial partners that set up EADS in 2000
have long been looking towards the exit to focus on core
businesses, the manoeuvring increasingly worries investors.
The moves overshadowed a blockbuster sale of 60 Airbus A320
jets to China Eastern worth $5 billion, the company's first
major deal with China since the European Union agreed to freeze
an airline emissions scheme opposed by Beijing.
"Fundamentally, the outlook for the company is completely
detached from these government moves. But coming fresh on the
heels of the BAE talks, it has again reminded investors that
EADS is not a standard, independent company," Stallard said.
Germany's strengthened shareholder position has triggered
speculation that it would allow the BAE deal to be revived. But
most officials have said the deal was blocked out of a complex
brew of political concerns that mainly remain.
"We doubt this is a curtain raiser to a revival of the BAE
deal," said Agency Partners analyst Nick Cunningham.
Ratings agency Fitch warned the new arrangements would do
little to ease concerns over corporate governance at Boeing's
European rival, especially in the eyes of potential
buyers of defence equipment like the United States.
"The changes will not alter the perception that EADS is a
state-controlled corporation, which restricts its chances of
winning large export defence contracts, but they would bolster
the finances of major shareholder Daimler."