EADS ready to dig deep into cash for M&A: executive


Europe’s EADS is ready to dig deep into its $16 billion cash pile to drive forward plans to expand in the United States and is in preliminary talks with several companies, said a senior executive.

Its wish list includes players that would make it easier for Europe’s largest aerospace company to bid for future U.S. procurement contracts while relying less on outside support, EADS North America Chef Executive Sean O’Keefe told Reuters.
“The resource capability we have right now is in the range of about $15-16 billion — this is liquidity we have available for acquisitions,” O’Keefe told the Reuters Aerospace & Defense Summit, Reuters reports.
“Some number between zero and $16 billion is what we are looking at and I’m not being constrained by the corporate leadership to say ‘eliminate this one because it is too big or too small’.”

O’Keefe’s comments indicate the Airbus parent’s acquisition drive is undimmed after four recent deals worth an estimated $2 billion designed to boost its position in high-margin services.

Despite these ambitions, most analysts say EADS is likely to spend substantially less than this amount, barring a game-changing deal with another top European or U.S. contractor that for the time being remains only an abstract possibility.

EADS executives have generally spoken of an acquisition warchest worth either $1-2 billion or 1-2 billion euros.

O’Keefe and other speakers at the Reuters event said a number of lower-tier industry suppliers are, however, coming forward looking for buyers or ready to merge with each other.

O’Keefe said the weak dollar had also sharpened the company’s appetite for acquisitions in recent months.

EADS wants to boost U.S. revenues to $10 billion a year from $1.5 billion now by the end of the decade as part of a strategy to reduce its reliance on volatile commercial airplane sales.
“You can’t do that organically or through acquisitions, you have got to do both,” O’Keefe said. “You have got to aggressively go after a wide range and number of different opportunities.”

EADS has plenty of cash because of strong sales of Airbus jetliners but also faces heavy development spending on its next jetliner, the A350.

Analysts say EADS accelerated its acquisition drive after losing a contest to supply 179 aerial refueling tankers to Boeing (BA.N) this year, a deal that would have substantially boosted its presence in the world’s largest defense market.

EADS was forced to lead its own bid in a re-run of the competition after partner Northrop Grumman (NOC.N) pulled out.

O’Keefe suggested EADS would like to wean itself off outside suppliers and offer more in-house in any future competitions, but stressed he was not identifying past suppliers as targets.
“There are several companies we are looking at today that would make that kind of opportunity much more organic in our offering; we could do more of it on our own,” O’Keefe said.
“It is not an identification of any players we look for, but … we would like to be able to compete for future programs with all the capabilities we need, rather than looking for a broader range of subcontractors. We seek to be an integrated company operating in the U.S. marketspace.”