Ares

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  • Assigning Blame
    Posted by Joe Anselmo 6:41 PM on Jun 19, 2011

    Forget the loss of the tanker contract. EADS says U.S. regulators are acting as a speed bump to its ambitious but slow-moving expansion plans in the North American defense market. At a June 18 media briefing in Paris, CEO Louis Gallois noted that the European aerospace giant lost an acquisition bid in the U.S. to a domestic buyer. Gallois says the seller of the company – which sources identify as a privately owned space services operation coveted by EADS’s Astrium unit – did not want to wait 3-4 months for the Committee on Foreign Investment in the United States (Cifius) to vet a deal with EADS. Instead, it accepted a slightly lower price from the U.S. bidder.

    “I’m not saying it’s impossible to buy a company in the U.S.,” says Gallois, who is confident a sale to EADS would have been approved. “But certainly we have to go through a process that is a bit longer.”

    But the real roadblock to EADS’s U.S. growth agenda is not Cifius but its own board of directors.  Despite an oft-stated goal of raising its U.S. revenues seven-fold by 2020, to $10 billion annually, the company so far has been unwilling to make a big acquisition in the U.S. That was underscored three years ago, when the board’s large industrial shareholders killed a deal  Gallois had put together to acquire United Industrial Corp., the parent of unmanned systems supplier AAI. Textron later bought AAI for $1.1 billion. By contrast, Italy’s Finmeccanica ponied up $5.2 billion that same year to acquire U.S.-based DRS Technologies.

    EADS’s U.S. expansion plan still relies largely on organic growth: Increased sales of military and civil helicopters, maritime radar systems, homeland security sensors, human-rated space capsules and services. Impressive as that may sound, it’s not nearly enough to bring the company to its $10 billion sales goal in an era when Pentagon budgets will be shrinking.

    As for the EADS board, Gallois seemed slightly exasperated when a foreign reporter said she didn’t understand why there had to be a delicate balance  between EADS’s French and German shareholders. “I understand you can’t understand, but it’s life,” he shot back. “The day France and Germany are merged, perhaps we will not need this balance.”

    Tags: ar99, PAS11

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