Bloomberg News

Daimler Exits EADS in $2.9 Billion Disposal to Fix Cars

April 17, 2013

Daimler AG (DAI), the world’s third- largest maker of luxury cars, sold its remaining stake in Airbus SAS (EAD) parent European Aeronautic, Defence & Space Co. for 2.2 billion euros ($2.9 billion) to focus on its auto business.

Daimler disposed of 61.1 million shares in EADS, equal to 7.5 percent of the total, at 37 euros a share, the Stuttgart, Germany-based automaker said in a statement today. EADS bought 16 million of the shares for 600 million euros, Daimler said.

The carmaker, which was among the founding forces behind Toulouse, France-based EADS more than a decade ago, has lost ground to Bayerische Motoren Werke AG and Volkswagen AG (VOW)’s Audi unit in vehicle sales, a gap that Chief Executive Officer Dieter Zetsche has pledged to close with a line-up of new models. Daimler pushed back long-standing profit targets in October and has initiated a cost-cutting plan amid a slowdown in Europe’s automotive market.

“The EADS stake sale secures a stable dividend payment for 2013,” said Sascha Gommel, a Frankfurt-based analyst with Commerzbank. “It’s better for Daimler to invest the money in the company’s core business or to spend it to the benefit of the shareholders in the form of a dividend payment.”

Daimler paid a dividend of 2.20 euros a share for 2012, unchanged from a year earlier, as earnings before interest and taxes fell 2 percent. BMW is increasing its dividend 8.7 percent to 2.50 euros a share after reporting record Ebit in 2012. Volkswagen is raising its payout 16 percent to 3.56 euros per preferred share.

Disposal Gain

A revaluation of Daimler’s stake in EADS will result in an estimated 2.7 billion-euro non-cash operating profit gain in the second quarter, the carmaker said last month. The exact figure, which depends on the stock price, will be announced when Daimler publishes second-quarter earnings in July, said Florian Martens, a spokesman. Daimler sold another 7.5 percent holding in EADS for 1.66 billion euros in December.

“We will invest the proceeds of the sale in the global growth of our divisions and the extension of our technological leadership,” Daimler Chief Financial Officer Bodo Uebber, a former EADS chairman, said yesterday. “We are pursuing a corporate strategy with a clear focus on automotive products and services.”

Daimler’s Mercedes-Benz brand lost the global luxury sales lead to BMW in 2005 and fell into third place behind Ingolstadt, Germany-based Audi in 2011. The gap has been widening since.

Mercedes Deliveries

First-quarter sales at Mercedes increased 3.5 percent to 324,898 vehicles. That compared with Audi’s 6.8 percent growth to 369,500 cars and sport-utilities and a jump of 7 percent to 381,404 deliveries at Munich-based BMW.

Mercedes is adding the CLA coupe to its compact-car line-up this year, complementing the A- and B-Class hatchbacks. The company is also rolling out a heavily revamped version of the upscale E-Class and will present a new generation of its high- end S-Class next month. Zetsche has outlined plans for 13 new models with no predecessor in the next eight years, including three additional variants of the S-Class.

Daimler fell as much as 1.5 percent to 38.89 euros and was trading down 0.6 percent at 11:04 a.m. in Frankfurt. EADS, Europe’s biggest aerospace company, climbed as much as 5.7 percent to 39.30 euros and was up 4.6 percent in Paris. The stock has gained 46 percent since Daimler announced the initial stake sale in December.

Goldman Sachs Group Inc. (GS:US) and Morgan Stanley (MS:US) acted as joint bookrunners, Daimler said.

Lagardere Withdrawal

EADS investors last month agreed to change the manufacturer’s capital structure, clearing the way for Daimler and Paris-based publisher Lagardere SCA (MMB) to exit their stakes.

Lagardere disposed of its holding on April 9 for 2.28 billion euros, with the capital gain net of taxes and transaction costs amounting to 1.8 billion euros, the publisher said April 15. EADS repurchased 1.6 percent of its stock for 500 million euros as part of that deal.

Under the new structure, EADS’s freely traded stock will increase, even with the introduction of the German state to replace Daimler. France, which has a 15 percent stake, will reduce that holding to 12 percent to match the German ownership.

EADS CEO Tom Enders has long sought a simpler shareholder structure, and he attempted a merger with BAE Systems Plc (BA/) last year to scale back political meddling. The plan failed after the German government refused to endorse the combination with Europe’s largest weapons maker.

As part of the EADS transaction, Daimler has entered into a derivatives agreement with Morgan Stanley and Goldman Sachs that will pay the carmaker any upside in EADS shares this year in cash. The two banks bought 8 million shares of the 61.1 million on offer to hedge themselves as counterparties in the derivatives deal. The size of Daimler’s derivatives purchase wasn’t disclosed.

To contact the reporters on this story: Robert Wall in London at rwall6@bloomberg.net; Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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Companies Mentioned

  • GS
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    • 0.89
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  • MS
    (Morgan Stanley)
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    • 0.13
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