Space acquisition to step up EADS spree

EADS is poised to step up a recent buying spree with a space industry acquisition in Europe that could rank among its biggest efforts to expand, sources familiar with the matter said on Sunday.

The acquisition marks the latest move by the world's second-largest aerospace group to expand into lucrative services and will be led by its Astrium space division, the sources said.

A spokesman for EADS declined to comment.

EADS has embarked on a series of medium-sized acquisitions to dent a huge cash pile and reduce its exposure to cyclical manufacturing revenues, especially those at passenger jet unit Airbus. Its target list includes services, defence and security.

The Astrium deal could be the group's second-largest acquisition after the €2.75 billion ($3.95bn) buyout of BAE Systems' 20 per cent stake in Airbus, which was forced on EADS in 2006 by BAE, a source familiar with the deal said.

Two sources said a deal could be announced early next week.

"This is again about EADS growing its services businesses," one of the sources said. None of the sources would agree to be identified because the transaction remains confidential.

Astrium has an outsourcing contract to operate secure Skynet satellites for Britain's military, but the share of services like these in its revenues has dipped in recent months to 31 per cent because of a slowdown in demand for mapping information.

Under pressure from analysts to look at better uses for an €11bn net cash surplus swollen by deposits for Airbus passenger jets, EADS has long said it is ready to spend up to €2bn to fund external growth.

But the pace quickened sharply after it lost a contest with Boeing, the world's largest aerospace company, to supply air tankers to the Pentagon in March. The setback removed a chance to make the United States a bigger launchpad for internal growth.

In June, EADS completed the purchase of Canadian repair business Vector Aerospace for about €450 million and last week Airbus announced a $500m bid for Danish parts distributor Satair.

Airbus also agreed to buy Metron Aviation, which supplies services for air traffic control, for an undisclosed sum. Analysts said further acquisitions could be in the pipeline after EADS posted better-than-expected mid-year results last week.

Europe's space industry is dominated by EADS Astrium with its Ariane space rocket and Thales Alena Space, owned by France's Thales and Italy's Finmeccanica. OHB Technology of Germany is also boosting its role.

Amid cuts in European arms spending, Astrium edged past the Cassidian defence unit to become the second-largest EADS unit by revenues in the first half with sales of €2.347bn.