Airbus Once Again Dilutes Ownership in Dassault Aviation

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Mar 26, 2015

European aero major Airbus (EADSY, Financial) recently diluted its ownership in French aircraft manufacturer Dassault Aviation (DUAVF, Financial) for the second time, deciding to sell 15% stake in the fighter and business jet maker, with plans of selling another 10% by mid-2015. Airbus is slowly unwinding its 16-year-old relationship with Dassault on the back of market volatility. Let’s take a look at what’s going on and what all this means for the companies involved.

Becoming Dassault-free

The process of reducing its stake in Dassault started a while back for Airbus when the company announced its plans to sell a total of 10% of its ownership and pulling down its stake to 36% from 46% for 4.8 billion-euro. The company had plans of selling its rights to institutional investors including Dassault family. Finally the company ended up reducing its stake to 42.1% in December last year. For those who don’t know, Dassault Aviation is controlled by the family known as Groupe Industriel Marcel Dassault.

Now the aero major plans to sell another 15% stake, pulling down the total ownership to just 27.1%. Earlier, a Reuters report mentioned that Airbus has plans of wrapping up the entire operations linked to Dassault by the end of 2015. Thus, this recent move doesn’t come as a bolt from the blue. The A380 maker doesn’t feel the relationship is adding any value to the company or to its shareholders. This coupled with the request from investors to divest its holding in Dassault and then return the proceeds to shareholders has resulted in the latest announcement. Airbus will be selling about 1.38 million ordinary shares in Dassault at a price ranging between 980 euros and 1,030 euros, resulting in a total sum of 1.4 billion euro. The story doesn’t end here. By mid-2015, another 10% ownership will be sold by Airbus, leaving just 17%, which is expected to be cleared off by 2015 end.

What this means for the companies

The Dassault family, like the last time, is interested to buy back the ownership from Airbus. According to reports, it plans to buy back 5% of Airbus’ stake (i.e., 460,000 ordinary shares) at a maximum price of 980 euros a share. This move shouldn’t upset any business potential for any of the companies.

Airbus’ primary motive is to return to its core and use the proceeds from the spinoff to fund its growth – a purely business decision. Dassault is a fantastic company, and this move shouldn’t be regarded as something that questions its credibility. According to Marwan Lahoud, Airbus strategy head, “Dassault's a well-managed company and should be interesting to institutional investors who like corporate jets.”

The deal is expected to boost Airbus’ business outlook as the company can benefit from a better use of capital and invest the money in something that will be more strategic and will offer better synergies. For Dassault, this move won’t bring in much of a change. The company is a top player in the defense and business aircraft space, and it’s expected to continue the good work.