By Polya Levosa
Published: 19 June 2011
PARIS (MarketWatch) — European aerospace and defense giant EADS N.V. said that acquisitions are key to its growth strategy and that it’s looking particularly for companies with a significant presence in North America.
At a media briefing Saturday ahead of the Paris Air Show, Chief Executive Louis Gallois said EADS FR:EAD -0.79% has to focus on growth in North America and that the loss of a much-coveted U.S. Air Force tanker contract to Boeing Co. BA -0.49% “is not the end of the world.”
In early March, EADS said it would not protest the U.S. Air Force’s selection of Boeing to replace the service’s aging fleet of KC-135 aerial refueling tankers.
“I don’t feel that we are ill-treated [by the U.S.],” Gallois said Saturday. “We have very good relations with the American administration.”
When pursuing acquisitions in the U.S., EADS faces some difficulties, Gallois said. EADS recently lost an opportunity to acquire a U.S. firm because of authorization delays, which led the seller to ultimately favor a rival bid from another U.S. company, he said.
As a foreign firm, EADS had to seek permission from the Committee on Foreign Investment in the U.S., which determines the impact of transactions on U.S. national security.
“It’s not so easy to buy a company in the U.S. You have to find the right one and to get the right authorization. It’s more difficult for us to get the authorization,” Gallois said. He noted that EADS may look to buy companies that are not American but work in the U.S., as it did earlier this year.
In March, Eurocopter Holding, an EADS unit, announced it will acquire Vector Aerospace Corp. in a deal valuing the equity of the Canadian firm at around C$625 million (US$637 million). EADS said then that acquiring Vector, which provides aviation repairs and overhaul services, would strengthen its presence in North America and increase its exposure to support and services.
“The crisis stopped major acquisitions, but acquisitions are back on the menu,” said Marwan Lahoud, chief strategy officer at EADS.
“We are talking about mid-sized companies in services, defense, security, with large exposure to the North American market or emerging markets, limited exposure to Europe, with a good track record,” Lahoud said.
He also noted that while EADS is also looking at opportunities in emerging markets, it faces some limitations. For example, in India EADS cannot own or control a business and has to seek local partners, Lahoud said.