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03 Mar 05. James Mackintosh of the FT in London reported that DaimlerChrysler is opposed to a takeover of Thales, France’s largest defence electronics, group by EADS, in which the German carmaker has a 30 per cent stake, a deal that was pursued seriously by EADS management late last year.

But Mr Schrempp said European Aeronautic Defence and Space could co-operate with Thales in certain areas, a comment likely to revive the hopes of the French government of at least some sort of deal. Thales is valued at €5.9bn, while EADS has a market capitalisation of €19.2bn.

“There are certain activities of Thales where it could make sense that they could co-operate,” he told the Financial Times. “But I do not believe either in terms of shareholder value nor in terms of strategy that a merger with Thales would make sense. I don’t think it would be in the interests of either party.”An attempt to engineer a takeover was scuppered at the end of last year when the German and British governments expressed opposition. The UK, a major Thales customer, was annoyed that it was not informed of the negotiations, while Germany feared it could upset the Franco-German balance in EADS.

Daimler’s 30 per cent holding is the largest single stake in EADS, which owns aeroplane manufacturer Airbus and is also a large defence supplier to Germany. A balancing French stake of 30 per cent is split equally between the Lagardère media group and the French government.

Mr Schrempp said he had no intention of selling Daimler’s €5.7bn stake in Europe’s biggest aerospace company in spite of a 10-year project to turn the German manufacturing conglomerate into a carmaker, its chief executive said. He said shares of EADS were likely to rise after the Airbus A380 superjumbo was launched in June 2006.

The company had been expected to dispose of its holding eventually, although German tax laws effectively prevent it selling before 2007. Both Mr Schrempp and the German government have demonstrated their close involvement with EADS in the past two months during a public battle with Jacques Chirac, French president, over its management structure. Mr Schrempp emerged victorious, preserving the dual chief executives, one French and one German. But Mr Schrempp raised the prospect of abandoning the practice of dividing up the other senior management jobs between French, German and Spanish executives. The company is currently searching for a new Airbus chief after Noël Forgeard was promoted to co-CEO of EADS, and observers had believed the job was sown up for a Frenchman.

Comment: As we reported last week in BATTLESPACE UPDATE Vol.7 ISSUE 8
24th February 2005, ‘THE EUROPEAN PENDULUM SWINGS AS BAE LOOKS ON,’ the end game in Europe looks as far off as ever. EADS appears to be caught between a rock and hard place with the engineering fraternity wanting a tie-up with Thales to fill the gap in its electronics expertise, the Main Board including Schrempp is wary of a greater French involvement in EADS, Dennis Ranque of Thales does not want Thales swallowed up as he will lose his empire, BAE sees the tie up as a threat in certain areas such as naval EW while the UK MoD is sulking because it was not told first!

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