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Jan. 31 (Bloomberg) -- Dassault Aviation SA rose the most in more than 22 years, after it emerged as the lowest bidder to supply 126 fighter jets to the Indian Air Force and entered into exclusive negotiations.
Dassault shares rose more than 18 percent to 725 euros in Paris. A majority of the stock is held by the Dassault family, while European Aerospace, Defense & Space Co., the co-producer of the competing Typhoon, owns 46 percent.
“The announcement comes after a very high-level, equitable and transparent competition,” French President Nicolas Sarkozy said in an e-mailed statement. “The Rafale was selected thanks to its cost effectiveness over the lifetime of the plane.”
For Dassault Aviation, the sale to India of its Rafale combat jet, which hasn’t won a single export order after 11 years of flying for the French military, would be mark a major victory. Over the last decade, Dassault has consistently lost out in competitions in countries including Singapore, South Korea, Morocco and Switzerland.
India’s Defense Ministry will begin exclusive negotiations with Dassault within 10 to 15 days, a government official told reporters in New Delhi today. Talks will likely last for weeks, pushing the signing of a contract beyond the March 31 end of India’s fiscal year, he said.
Indian law requires the government to negotiate a contract with the lowest-bidding vendor. Dassault is competing in the $11 billion contest against the Typhoon, the Eurofighter plane built by BAE Systems Plc, European Aeronautic, Defence & Space Co. and Italy’s Finmeccanica Spa.
Dassault is still in the running to win a contest in the United Arab Emirates, and remains in talks with Brazil about a contract.
Although it has been producing a plane a month for the French military, without export orders to help pay the cost of production, its funding burden falls entirely on France.
India shortlisted the Rafale and Eurofighter in April, when it rejected bids from U.S. manufacturers Lockheed Martin Corp. and Boeing Co., as well as Saab AB and OAO United Aircraft Corp. The country is buying the fighters to replace an aging fleet of Russian MiG-21s and Dassault Mirage 2000s.
Dassault had no immediate comment. The company recently lost a contest to Saab’s Gripen in Switzerland, and Dassault has since sought to get back into the contest by offering a new commercial offer that includes fewer and modified Rafale jets.
--Editor: Vidya Root, Steve Rhinds
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