Friday, September 22, 2006

Russians buy stake in EADS and try to gain control

The Russian government has become the largest independent shareholder of the European Aeronautical Defense and Space (EADS) company, and it's openly trying to take control of the French-German-Spanish enterprise.

This is bad for a number of reasons: EADS prides itself as a reliable partner with the United States, which it can no longer be if the Russians get in the door; and EADS would be supplying advanced technology and know-how to Moscow's military industries.

EADS is competing to build the Joint Cargo Aircraft (JCA) for the US Army and Air Force in what is reported to be a deal worth tens of billions of dollars. EADS says it wants to have assembly plants in the United States so that it can gain political influence and have a greater say in US defense spending.

According to Flight International, "Russian government officials have said they hope Vneshtorgbank's (VTB) purchase of €950 million ($1.2 billion) in traded shares - equivalent to 5.02% of EADS - could be turned into a blocking stake.

EADS is thrilled with the cash as what its joint chairmen call a "manifestation of interest and confidence in the long-run success of EADS." But they say they won't offer the Russians a seat on the board, and they won't alter the French-German-Spanish government ownership structure.

The Russians aren't likely to settle for a back seat and might try to purchase up to 25 percent of the company. About 30 percent of EADS shares are publicly traded and there is no restriction on who owns them.

"A spokesman for Russia's president Vladimir Putin said the Kremlin wants 'real participation in the control' of EADS as 'a full-rights member of the directors' council' and may try to raise the stake to 25%," according to the report.

As with its sale of C-295 military transport planes to the Chavez regime in Venezuela, EADS has been trying to keep the Russian stock purchase out of the public eye.

EADS wants to break into the Russian airliner market, but it is also trying to get a foothold in the American defense and homeland security sectors. Its choices might be (and should be) irreconcilable.

As Flight International notes, "an increasing Russian-owned stake in EADS will set alarm bells ringing in the USA."


Post a Comment

<< Home