Time to say goodbye

5 Apr 2006 By Nina Koeppen

The German carmaker s decision to sell a 7.5% stake in the defence group doesn t go far enough. It is still stuck with a 22.5% stake. True, Daimler can t just dump the stock; defence is a political issue. But it should find a way to exit and cut the conglomerate discount. Only politics is preventing Daimler from exiting entirely. In the meantime, Daimler continues to suffer a conglomerate discount.

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DaimlerChrysler is selling a 7.5% stake in the European Aeronautic Defence and Space Company. This will reduce its EADS shareholding to 22.5% from a current 30%.

But the deal won't settle before spring 2007 due to tax reasons. The carmaker has entered into a forward sales agreement with investment banks. It will lend the shares to the banks – they are believed to be Morgan Stanley and JP Morgan which will then place the stock in the market. The sale will boost Daimler's net income by about E1bn next year.

The deal has been prepared in close cooperation with the French Lagardère SCA which also intends to reduce its indirect 15% stake in EADS to 7.5%, Daimler said, adding that the two firms "are determined to further support the continued success of EADS and remain core shareholders.

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