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6 Sep, 2007 05:06

Russian VTB bank could dump its EADS share

The Russian bank VTB is selling its stake in European Aerospace Company EADS in the next two or three months. Then new state holding company, United Aircraft Corporation, may be interested in the acquisition, but market watchers say there could be other i

VTB bought a five-percent stake in the European Aerospace Corporation last year, an investment regarded by many as politically motivated.

The Russian government has recently formed an air holding, United Aircraft Corporation, and wants it to have closer cooperation with EADS.

“The investment made economic sense – EADS shares were very cheap. And VTB decided to make money on it. At the same, time political motivation for the purchase was significant. Russia wants to revive its aircraft industry. It set up the United Aircraft Corporation and needs EADS technologies to speed up the development of the sector,” Mikhail Ganelin, Troika Dialog analyst, commented.

After it floated on the market, VTB decided to get rid of non-core assets and announced a time frame to sell its stake in EADS. Market watchers say VTB may hand its shares to the United Aircraft Corporation, a scheme previously suggested by Vladimir Putin.

“It needs the EADS and wants closer co-operation. So it can buy it alone or, because it is a significant sum of money, the government could ask some of the Russian oligarchs to buy the stake and hold it for a while, until UAC raises the cash,” Mikhail Ganelin explains.

Evgeny Shago from Trust Bank says UAC has neither strategic nor financial motives for the purchase.

“The stake costs $US 1 BLN. Even if UAC had the money they could find a better way to spend it within the country than to buy a stake that does not provide anything. You should have at least 20% of EADS to take part in managing it. And Europe has expressed very clearly that it does not want Russia to boost its stake,” Evgeny Shago noted.

VTB may look for a better price on the global market.

A Dubai investment fund and a Spanish state holding, both current shareholders of EADS, have shown interest in building their stakes and could eagerly snap up VTB’s 5% share.