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03 Jul 06. The BBC reported that an independent valuation of Airbus has valued BAE Systems’ 20% stake in the business at 2.75bn euros (£1.9bn). BAE had hoped to receive double that amount for its shares before recent disclosures about delays to deliveries of Airbus’ A380 superjumbo jet liner. The defence group’s shares fell almost 4 per cent to 354.875p a drop of 14.43p in early trade on the news at 0836. EADS was barley lower at €22.30 a drop of .58%

BAE said it would consider the verdict and advise shareholders whether to accept a sale at that price. The low valuation is a new setback for Airbus, coming the same day the bosses of EADS and Airbus both resigned. EADS co-chief executive Noel Forgeard stepped down as he faced intense pressure in the wake of an insider trading scandal. Airbus chief Gustav Humbert quit citing delays to the superjumbo.

As parent company of Airbus, EADS owns the remaining 80% of shares in the company. In its own statement, EADS said it would meet the independent valuation, carried out by the Rothschild investment bank, proposing a cash purchase of BAE’s Airbus stake. There will be also be concern among investors about precisely why Rothschilds offered such a low assessment of what Airbus is worth

But the low valuation is bad news for both BAE and EADS, says the BBC’s business editor Robert Peston.

While BAE now faces the prospect of a reduced income for its stake in Airbus, as the larger shareholder the valuation is probably worse news for EADS, he says.

There will be also be concern among investors about precisely why Rothschilds offered such a low assessment of what the business is worth, our correspondent adds.

Under the sale process that it has triggered, BAE Systems is obliged to ask its shareholders to vote on whether to sell the stake. But considering the low valuation, it may recommend not to sell the stake, which would be a complete reversal of the view taken before it received the Rothschild valuation.

News of the low valuation came at the end of a tumultuous day for EADS and Airbus after senior executives of both firms stood down. “The recently announced delay on the A380 production and delivery programme has been a major disappointment for our customers, our shareholders and our employees,” admitted Airbus’ Gustav Humbert.

Mr Humbert, a German, is being succeeded by Christian Streiff, a former executive of French building materials group Saint-Gobain. EADS’ Noel Forgeard is being replaced by fellow Frenchman Louis Gallois, head of French state railway company SNCF. Co-chief executive of Airbus since last year, Mr Forgeard has continually denied any wrongdoing over his selling of EADS shares. He said he sold the shares in question in March of this year, and that he did not know of delays in the production of the A380 until April.

Following the share scandal, there were also calls for EADS to end its dual management structure. Mr Humbert has resigned to take responsibility for the A380 delays

A Franco-German firm, it has two chief executives and two chairmen, one from each country. It looks as if this structure will continue. The delays to the A380 have been caused by wiring problems. EADS now says that only nine of the planes, instead of the previously expected 20 to 25, will be delivered next year. As a result, Airbus is to hold talks on compensation with those airlines who have already ordered the plane.

Comment: The big question that must now be asked is whether the French desire to beat Boeing to the super jumbo has damaged the structure and credibility of the European defence industry. BATTLESPACE has been watching this spat since inception and the question always remained, Why did Boeing stand back from competing head on? The proof of the pudding as they say is in the eating. Firstly the engineering challenge to such a project a

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