LONDON (Reuters) – Defence firm BAE Systems won shareholders’ backing on Wednesday to sell its stake in planemaker Airbus to EADS (EAD.PA: Quote, Profile, Research) , which a day earlier said a fresh delay in the A380 superjumbo would hit earnings.
BAE Chairman Dick Olver told an extraordinary shareholders meeting called in London to vote on a board proposal to sell the 20-percent stake that 99.85 percent of proxy votes representing more than 70 percent of its shareholders had voted in favour of the sale.
The stake has been valued at 2.75 billion euros (1.9 billion pounds) is expected to be finalised in 10 working days.
Shares in BAE were 0.7 percent down at 396-1/2 pence versus London’s FTSE 100 index which was 0.1 percent up as of 10:06 GMT (11:06 a.m. British time).
Initially deemed lower than expected by BAE and investors, the stake’s 2.75-billion-euro valuation set by investment bank Rothschild in July is seen positively by some who argue BAE has picked a clever time to leave the planemaker.
Franco-German firm EADS will own 100 percent of Airbus after the sale.
On Tuesday, EADS revealed that a fresh delay in the A380 would push back the plane’s first delivery by an additional 10 months to the fourth quarter of 2007, strip expected free cash flow through 2010 by over 6 billion euros (4 billion pounds) and mean no operating profit on the plane for four years.
Brokerages responded by chopping their EADS share price targets and ratings agency Standard & Poor’s said it might lower the firm’s ‘A’ long-term corporate credit ratings.
Airbus said it would launch a cost-cutting plan called “Power8” aimed at saving 2 billion euros (1.3 billion pounds) a year by 2010.
BAE announced its intentions in April to sell its stake to EADS, a right it holds under a pact signed by Airbus’s two owners.
When they could not agree on a price, UK investment bank Rothschilds was brought in and BAE initially balked at its valuation.
BAE requested an audit which was delivered by accountants PriceWaterhouseCoopers last month which seemed to set BAE’s mind at rest.
“Airbus is facing a challenging short to medium-term outlook,” BAE concluded. “Airbus is likely to require significant investment to maintain its position in the market.”
Airbus’s resources are being squeezed by delays caused by complex wiring required for the A380 superjumbo.
Development of the plane has cost 12 billion euros (8 billion pounds) and Airbus has secured 159 orders, about half of what some analysts say would be the minimum number needed for the programme to break even.
Hit by a second and now a third confirmed delay, the A380 has not won a single firm new order in 2006.
The latest delay means customers will increase demands for compensation while some might decide on outright cancellations of their orders for the $300 million (159 million pound) planes.
Compensation stems from the costs facing airlines which will have to lease other planes until their A380s are ready.
BAE is Europe’s largest defence firm and a major player in armoured vehicles, nuclear submarines and other warships.
Europe’s biggest player in the massive U.S. defence market, BAE’s footprint in Europe includes roles in major consortia building the Eurofighter combat jet and MBDA missiles.
Its Airbus stake sale will dilute BAE’s earnings but the firm is expected to use some of the proceeds on new acquisitions.
Airbus contributed 254 million pounds in profits before taxation on sales of 3 billion pounds for BAE in 2005.
BAE said it expected to pocket about 1.2 billion pounds in net proceeds from the stake sale and that it would spend up to 500 million pounds on a share buyback.