Russia's State-Controlled Bank Quietly Buys Stake in European Aeronautic Defense & Space (EADS)

Strategic Insights -

Russian state bank Vneshtorgbank has purchased a 4.5 percent to 4.8 percent stake in European Aeronautic Defense & Space (EADS), the parent company of Airbus, according to a report by Russian business newspaper Vedomosti. The purchase has sent EADS stock soaring, with shares rising 34 cents to close at 22.98 euros. The move marks another foray by Russian state-controlled business into Western Europe, following Gazprom's purchases of energy and pipeline companies in the region.

Key Takeaways:

  • Vneshtorgbank, a Russian state-owned bank, has spent roughly $1 billion to buy a stake in EADS, the parent company of Airbus.
  • The purchase represents a significant plunge by Russian state-controlled business into Western Europe, following Gazprom's investments in European energy companies.
  • EADS stock rose 34 cents to close at 22.98 euros on the news, despite government officials in Moscow declining to confirm the report.
  • Financial market regulations in the Netherlands, where EADS is incorporated, require the purchaser to notify the Dutch authorities and the target company immediately once a 5 percent threshold has been reached.
  • Market rules in France and Germany, where EADS shares are listed, give the purchaser up to seven days to notify the target company.
  • EADS's shareholder agreement does not grant the right to appoint board members to non-core shareholders, including Vneshtorgbank.
  • The purchase is seen as a strategic move by Russia to gain a management role at EADS and potentially influence the company's decision-making process.
  • Russia is in the process of retooling its aircraft industry, backing out of sectors like wide-body passenger jets and throwing support behind regional and cargo airplanes.

Statistics:

  • $1 billion: cost of Vneshtorgbank's stake purchase in EADS.
  • 4.5-4.8 percent: percentage of EADS shares owned by Vneshtorgbank.
  • 22.98 euros: closing price of EADS stock after the announcement.
  • 5 percent: threshold at which the purchaser must notify the Dutch authorities and the target company.
  • 7 days: maximum time for the purchaser to notify the target company under market rules in France and Germany.

Sources:

  • Russian business newspaper Vedomosti.
  • Netherlands Authority for the Financial Markets in Amsterdam.
  • EADS in Munich.
  • Interview with Konstantin Kozhevnikov, senior vice president and member of the board of Vneshtorgbank.
  • International Herald Tribune.
  • The Washington Post.
  • The New York Times.