EADS eyeing U.S. acquisitions

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Europe’s EADS is looking at several acquisition targets in the United States, particularly companies in the military services sector, the company’s top U.S. official told Reuters.

Sean O’Keefe, chief executive of EADS North America, said he expected the company to make decide within the coming weeks whether to proceed with due diligence on any specific deals.

He declined to give any details on the expected size of any acquisition, saying the companies that EADS is currently examining range widely in size.

He said the EADS board was now prepared to make investments in the United States after halting work on a deal valued at around $1 billion in late 2008.
“There’s several different potential targets that we’re looking at,” O’Keefe told Reuters at the Farnborough Airshow.

Any acquisitions in the United States could help O’Keefe meet the goal of expanding EADS’s North American revenue to $10 billion by 2020 from expected sales of around $1.5 billion in 2010 and around $1.2 billion in 2009.

One key deal is the bitter competition EADS is locked in with Boeing Co to build 179 new refuelling planes for the U.S. Air Force.

O’Keefe said EADS could still meet the revenue target even if it did not win the tanker contract, valued at up to $50 billion, but it would have to “find some other big stuff.”

The company has teamed with Lockheed Martin Corp to bid in an anticipated U.S. Army competition for a new armed helicopter, and is also pitching its A400M transport plane to meet future U.S. airlift needs.

Pentagon acquisition chief Ashton Carter and U.S. Air Force Secretary Michael Donley toured the cargo plane during visits to the Farnborough Airshow this week, O’Keefe said.

He said EADS officials briefed both men on the operational characteristics of the new transport plane, which required a 3.5 billion euro bailout earlier this year after it ran into massive cost overruns and software problems.

O’Keefe said the briefings went “very well” and Carter was “most impressed” with his visits to both the A400M and the new commercial plane developed by Airbus, the commercial unit of EADS. Mostly, Carter was “in listen mode,” O’Keefe said.

The A400M’s capacity exceeds that of Lockheed Martin Corp’s C-130J and can carry two-thirds as much as a Boeing C-17, but is far more flexible because it can land on undeveloped runways of under 3,000 feet, O’Keefe said.

But Boeing says the C-17 can land on runways as short as 1,000 feet, and does this daily in Afghanistan. “The C-17 has been landing on short, unprepared runways long before the A400M even became a concept,” said spokesman Jerry Drelling.

O’Keefe said the company’s U.S. strategy would also involve seeking more commercial business for Airbus, as well as expanding satellite service work by its Astrium unit.

But the tanker was a huge program and EADS was investing heavily to win the competition, O’Keefe said, although he declined to give a specific amount. “But it doesn’t mean that everything crumbles if this doesn’t work,” he added.

O’Keefe said he was confident about the company’s chances of winning the tanker competition, given that it was nearing delivery of the first Australian tanker, an aircraft that is 90 percent the same as the tanker it is offering the US.

EADS had up to 150 people working on the tanker proposal, seven days a week, before it submitted its bid, O’Keefe said.

He said the company had moved a core staff of about 50 people to Mobile, Alabama, where EADS plans to build the refuelling planes if it wins. By fall, when the Air Force plans to award the contract, the number of staff working on the program in Alabama will have grown to around 100, he said.



PIC: Sean O’Keefe, chief executive of EADS North America