Shares in BAE Systems tumbled yesterday as it came to terms with a surprise verdict on the worth of its 20 per cent stake in European plane-maker Airbus.
The defence and aerospace giant will be paid just 2.75 billion euros (£1.9 billion) for the holding, much less than City analysts had been hoping for.
The valuation was set by NM Rothschild, the invest-ment bank that was asked to act as an independent assessor after BAE told Airbus's Franco-German owner that it wanted to sell up.
Analysts had put a value of between £3 billion and £4 billion on the stake, which BAE is seeking to offload as it looks to fund expansion in the United States.
The BAE board is expected to meet this week to discuss its reaction to the valuation and prepare its recommendation to shareholders - the sale of the 20 per cent stake needs shareholder approval.
However, no firm decision has yet been taken and some industry experts believe BAE may even consider the possibility of launching legal action against EADS over the way financial information regarding delays to the A380 delivery programme was handled. It was this factor that led to a s harp downturn in the valuation. A BAE spokesman yesterday refused to rule out the possibility of legal action.
"There are a number of options that the BAE board will consider before making a recommendation to share-holders," he said.
In a statement, BAE warned the disposal of the 20 per cent stake would result in "significant earnings dilution", although it would improve the group's financial position.
Stockbrokers Panmure Gordon said BAE shareholders could still vote the valuation down and reject the Airbus stake sale, or back the board to go to court over the situation.
US brokerage JP Morgan also reckoned there is a good chance that BAE shareholders will reject the proposed stake sale.
"Rothschild appears to have relied heavily on the current market capitalisation of EADS which, in our view, has fallen too far following the recently announced delays to the A380 programme," it said in an investment note.
It expects the BAE board to try to convince shareholders that it can achieve a higher price for its Airbus stake at a later date, reflecting its longer-term prospects.
"However, there is no assurance that BAE will secure a higher price and, in the meantime, any plans to materially increase its presence in the US will have to be put on hold," the house added.
Meanwhile, Dublin-based low cost airline Ryanair yesterday announced it had ordered ten new aircraft from Airbus arch-rival Boeing in a deal worth $700 million (£379 million).
It is part of a plan to more than double the size of the budget carrier's fleet in the next six years.
At the moment the Irish firm has a fleet of 107 Boeing 737-800s, but expects to be using 249 by 2012.
Last month the airline announced pretax profits of 302 million euros (£208 million) - despite a 74 per cent rise in fuel costs.
Ryanair has pledged to develop services from Marseille, where it is developing a new hub, and Frankfurt. BAE shares closed down 12p at 357.75p ..SUPL: