EADS

Andrew Hill

EADS closes Paris: "Someday you'll understand…" ('Casablanca', AP Photo, Files)

If corporate headquarters always have a symbolic as well as an organisational function then EADS’ arrangements symbolised the political complexity of the pan-European aerospace and defence company.

The group’s website lists three “head offices” – in Paris, Munich and Madrid – and one “headquarters”, in Amsterdam. But since an April reorganisation, the group has referred to Toulouse, where chief executive Tom Enders and the important Airbus business are based, as its “single operational headquarters”. That should have been a clue to staff elsewhere that their future might not be so stable. If you’re not operational, you are probably an overhead. So it has proved: EADS is poised to close the Paris office, next to the Bois de Boulogne. 

Andrew Hill

Tom Albanese’s departure looks abrupt, but only in the sense that most outsiders had wearied of hearing calls for the Rio Tinto chief’s head. As Lex has pointed out, his resignation was long overdue.

Since the dire implications of Mr Albanese’s decision to push through the Alcan purchase at the top of the market in 2007 became clear, people had been saying his days were numbered. “I expect him to be out within 12 months,” was the rash prediction of one unnamed investor in 2009. 

Andrew Hill

Ian King and Dick Olver, respectively chief executive and chairman of BAE Systems, are in for a rough ride now the planned deal with EADS has collapsed. When merger plans fall through, the people in the top jobs are always vulnerable. But recent experience suggests Mr King’s future is more secure than Mr Olver’s.

Take a look at a handful of recent abortive transactions – G4S’s takeover of ISS in the support services sector, the tie-up between miners BHP Billiton and Rio Tinto (or, if you prefer, the uncompleted deal between Rio Tinto and Chinalco), the proposed merger of Prudential, the UK insurer, and AIA. The chief executives of all the companies involved are still in position, even though some (Nick Buckles of G4S, I’m talking about you) have suffered further setbacks since their favourite tie-ups unravelled. 

John Gapper

The takeover of BAE Systems by EADS to create the biggest European civil and defence aerospace company was always a hard sell to its political and financial shareholders. It is starting to look out of reach.

The latest opponent is Invesco Perpetual, which owns more than 13 per cent of BAE and thinks, to paraphrase, that the company is a deal-junkie that ought to run its business better rather than seeking salvation through M&A. 

Andrew Hill

“National interests in the sphere of strategic-level business have all but disappeared,” claims a senior executive of EADS in a new book. But the opinion of Lutz Bertling, chief executive of the group’s Eurocopter subsidiary, is now being tested in battle, as national governments wrangle over what a merger between EADS and BAE Systems would look like.

To be fair, the German executive’s chapter – “Commercial Top Strategic Leadership: A Helicopter View” – was written before the EADS-BAE talks became public. But the question of how Mr Bertling’s personal views might apply to the aerospace and defence merger was raised at Thursday’s launch of In Business and Battle, a “cross-cultural, cross-sectoral and international” anthology of insights into strategic military and civilian leadership. The discussion at London’s Royal College of Defence Studies – where Mr Bertling first presented his ideas – was non-attributable. But as one of the distinguished guests said: “Consolidation is right, but whether this is the particular merger that should be backed is still open to some debate.” 

Andrew Hill

Shareholders in BAE Systems and EADS should know what they’re getting into. The FT’s Alison Smith laid out the governance pitfalls on Friday, and Steven Davidoff has pointed out for the New York Times’ Dealbook that setting up a dual-listed structure requires an “unbelievably complex set of agreements in which [the companies] agree to equalise their shares, run their operations collectively and share equally in profits, losses, dividends and any liquidation”.

But a picture is worth a thousand words, so here are three illustrations of the full horror of some dual-listed structures. Expect EADS-BAE, with the added political and defence ingredients, to be 100 times more complex. Nice work for investment bankers, corporate lawyers and company secretaries; hard work for everyone else.

1. This classic describes the consequences of Reuters’ 2008 merger with Thomson Corporation (from the 545-page prospectus that one investor likened to War and Peace). Easy to see why the Anglo-Canadian DLC ended up abandoning its London listing in 2009:

 

 

Richard Milne

EADS was meant to be the model European company. That long ago ceased to be the case, unless the model it was highlighting was a feeble, if not to say broken, one.

But the company still holds up a mirror to the continent and the flurry of news in recent days makes uncomfortable reading for European business.