Approximately $1.5 Billion Less Than Originally Forecast

ANN REALTIME UPDATE 09.06.06 1915 EDT: We had a feeling it would turn out this way. Just hours after denying rumors the aerospace company planned to sell its 20 percent stake in EADS, BAE Systems announced late Wednesday its board will go ahead with the plan after all.

Bloomberg reports the deal, valued at $3.5 billion, is subject to the approval of BAE's shareholders. That's $1.5 billion less than BAE has originally estimated its stake in EADS to be worth... but that was before this summer's turmoil at planemaker Airbus.

"The board believes that Airbus is facing a challenging short- to medium- term outlook," BAE reported to the London Stock Exchange. "The board therefore believes that is in the best interests of the company to exit at the price determined by the independent expert."

Original Report

Officials at Britain's BAE Systems discounted rumors the company was preparing to dump its 20 percent stake in EADS at a price far lower than the company originally wanted.

The Independent newspaper reported Sunday BAE planned to green-light the sale at a board meeting this week -- a report BAE Systems called premature, adding any decisions on a sale would be made by shareholders, not the board.

As Aero-News reported, in July third-party auditing firm N.M. Rothschild & Sons Ltd valued BAE's stake in the European aerospace consortium at $3.5 billion -- $1.5 billion less than BAE had estimated its shares were worth. The discrepancy was due, in large part, to troubles at planemaker Airbus this year.

In hopes of securing a better deal, BAE then called for an audit of Airbus... hoping that valuation would bump up the price. That audit was to be completed before the end of August... but its results have not been made public.

The British aerospace manufacturer hoped to sell off its shares in EADS to raise capital for investment in defense contract companies... especially those in North America. BAE Systems does have the option of holding onto its shares, in hopes of a better price down the road.

FMI: www.baesystems.com, www.eads.com