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EADS ACQUIRES BAE STAKE IN ASTRIUM

January 31, 2003 by

EADS ACQUIRES BAE STAKE IN ASTRIUM AND TAKES CONTROL OF PARADIGM

31 Jan 03. EADS is acquiring BAE SYSTEMS 25 percent interest (27.5
percent economic share) in Astrium, Europe’s leading space company. The transaction signed on 30 January 2003, will be implemented when all regulatory clearances have been obtained. Full control of Paradigm Secure Communications Ltd., formerly held by BAE SYSTEMS and EADS, has been transferred to EADS.

Prior to completion of the transaction, EADS and BAE SYSTEMS will each make a capital contribution into Astrium of 1/4 €84m (total €168m). The cash contribution will facilitate the acceleration of EADS, strategy of increasing the overall industrial and financial efficiency of the company. Taking into account the cash injection, BAE SYSTEMS interest will effectively be transferred to EADS for no net cash consideration. These terms reflect the current deterioration in the commercial space sector and also EADS, continued intent to position Astrium for a return to profitability in 2004 and leadership in any future consolidation of the space industry under unified
management.

In July 2002, EADS and BAE SYSTEMS had announced their intention for EADS to acquire the interest of BAE SYSTEMS in Astrium and formed Paradigm Secure Communications to address service provision for the proposed Skynet 5 military communications satellite programme for the UK MoD. Under the original terms, completion of the sale of the Astrium interest was conditional on completion of
contracts with the UK MoD for the Skynet 5 programme. In the event of EADS not achieving financial close of the Skynet 5 contract, BAE SYSTEMS will pay 1/4 of €55m to EADS.

EADS continues to view the Skynet 5 programme as being of strategic importance to both its UK and space initiatives and is fully committed to signing the Skynet 5 contract with the UK MoD as soon as possible. BAE SYSTEMS will continue to support EADS in securing the Skynet 5 contract.

For EADS, the acquisition is a key element in its effort to restructure and integrate all its Space interests in the UK, France, Germany and Spain. EADS will gain the strategic and restructuring flexibility required by the current space market conditions.

“The Space business is a key enabler of EADS, future growth in the provision of large systems, it is at the core of our offering,” said Francois Auque, Member of the EADS Executive Committee and Head of the Space Division. “It provides synergies with our other core businesses and will generate new growth opportunities in defence, for example network centric warfare, secured telecom, and ballistic missile defence. The Space business can also provide for new growth opportunities in the commercial business, for example air traffic management and navigation. Consolidating our ownership of Astrium will allow EADS to strengthen its strategic positioning in a rapidly changing market place”, Auque said. “Taking the full ownership of Paradigm will allow us to expand in military telecommunications satellites services, which we have identified as a major area of future growth”, he added.

Jean-Louis Gergorin, Member of the EADS Executive Committee and Head of Strategic Coordination, commented, “EADS is very much at home in the UK. This simplification of Astrium’s share ownership, and our pursuit of the Skynet 5 programme, which should be closed in early 2003, underscore our commitment to our already strong industrial presence, to our British Customer, the Ministry of Defence, and to our 12,000 strong, highly-skilled UK workforce.”

Stephen Henwood, BAE SYSTEMS Group Managing Director International Programmes, said, “The disposal of Astrium marks the exit of BAE SYSTEMS from its non-core space sector.”

Comment: Well the Uk exits the space business again, and this time it loks for good. This is an excellent deal for EADS as it brings the company the multi-million pound Skynet 5 UK satellite communications project which is s

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