Court of Appeal blocks the transfer of the assets of IAR Ghimbav over to Eurocopter Romania

• The Court of Appeal ruled in favor of the smaller shareholders, who filed a lawsuit against the transfer of assets claiming that it would be against their interests

The Court of Appeal of Braşov has blocked the transfer of the assets of IAR Ghimbav to Eurocopter. Last month, the judges of Braşov admitted the appeal filed by the smaller shareholders of IAR Ghimbav concerning the rejection of the presidential ordinance and ruled "the suspension of the decision made by the General Meeting of the shareholders of IAR SA Ghimbav no. 5/ 16.06.2010, published in the Official Gazette no. 2953/06.07.2010 (Appendix 4) until the ruling in first instance of the action for annulment filed with the Court of Braşov - The Commercial Law and Administrative Division with the no. 7684/62/2010". The lawsuit in question is trying to obtain the annulment of the decision to transfer the most important assets of the company of Braşov to Eurocopter Romania, which is part of the Eurocopter group.

The lawsuit had been filed by SIF Transilvania and by investment fund MEI Roemenie en Bulgarije against IAR Ghimbav, Eurocopter Romania and the Ministry of the Economy and Commerce, who is the majority shareholder of IAR Ghimbav. Eurocopter Romania is part of the "European Aeronautic Defense and Space Company EADS N.V." Holland (EADS) group. The EADS has a global presence and operates in sectors such as manufacturing and marketing commercial and military aircraft, telecommunication equipment, security and defense systems, satellites, launchers and orbital infrastructures.

• What"s really at stake - The assembly hangar

The asset that the French wanted the most was the Assembly hangar, as they were expecting that "by acquiring it" they would succeed in completing on time the contract of 550 million Euros for the modernization of the helicopters of the British Army. The assets of IAR which were included in the transaction included buildings, plots of land, installation, machinery and tools, as well as the afferent technical documentation and the training for the manufacturing of helicopters, which means providing maintenance, repair and general overhauling for the military helicopter models SA 330, IAR 330, SA 316 and IAR 316.

In June, the shareholders of IAR Ghimbav approved the transfer of the company"s most important assets as a contribution to the company"s share capital. The decision, which was approved with 79% of the votes in favor, approved "the participation of IAR SA in the share capital increase of Eurocopter Romania SA with a contribution in kind consisting of plots of land, buildings, tangible assets, manufacturing expertise, and the technical documentation pertaining to the maintenance repair and overhaul activities for the IAR 316 B Alouette III and IAR 330 Puma helicopter models". Also, according to the decision of the shareholders, "the contribution of IAR SA at the share capital increase of Eurocopter Romania SA amounts to 3,259,000 Euros and represents the value of the assets contributed to Eurocopter Romania SA, amounting to 3,533,000 Euros (as determined in the evaluation report drawn up by Romcontrol SA), less the amount of 274,500 Euros which represents the initial unused contribution to the capital of SC Eurocopter Romania SA (which would be used for seven years instead of the ten years as specified in the beginning), representing the remaining usufruct right over the buildings and plots of land that IAR contributed in 2003 to the capital of Eurocopter Romania".

It is also noteworthy that Eurocopter had initially wanted to buy IAR Ghimbav, but it had only offered 1 million Euros, which is why the privatization didn"t go through. Later the plan to privatize the company was replaced by the alternative of transferring the assets of IAR to Eurocopter Romania, a joint-venture in which the French held 51% and 49% was controlled by IAR.

• The Government hurt in its pride

The transfer of the assets was the subject of a memorandum agreement signed by Eurocopter and the Romanian government, which provided the creation of an aerospace industrial park centered around Eurocopter Romania. The French announced that they planned to invest 7.1 million Euros in the Eurocopter Romania, subject to IAR Ghimbav not interfering with the company"s plans. "Eurocopter SAS demands that the parties agree that IAR will no longer perform any activities that could double or reduce the business perimeter developed at Eurocopter Romania once the contract has been signed, because that would threaten the economic viability of the business model as it was previously presented", the memorandum states.

The plans of Eurocopter SAS included increasing the number of employees of Eurocopter Romania from 112 to 240 people, which would ensure the functioning of the international maintenance, repairs and overhaul center. According to the project by Eurocopter, the number of employees could have gone as high as 300, but only on the condition that the government would place orders with the company and a new helicopter assembly line would be created.

• The Competition Council had agreed to the transfer of the assets in October

Until the Court of Appeal of Braşov reached this decision, no one expected this transfer of assets to fail, because even the Council of Competition had given its approval for the deal at the end of October. A communiqué by the Council stated that "the analysis performed by the Competition Council has shown that, even though this economic concentration of power falls under the incidence of the competition legislation, it does not prevent effective competition on the Romanian market, and therefore does not result in the elimination, distortion or significant limitation of competition ".

• Eurocopter"s contract with Great Britain - in danger?

Once the smaller shareholders decided to go to court over the transfer of assets, Eurocopter tried to pressure the Romanian party into forcing a ruling in favor of Eurocopter. The company published in the British daily "The Times" an article which announced that Eurocopter Romania may fail to carry out its 550 million Euros contract for the modernization of 30 PUMA aircraft belonging to the British army.

On the next day, Eurocopter Romania went back on that statement and said that there was no risk whatsoever of it failing to honor its contract, because "Eurocopter and the UK Ministry of Defense had agreed at a very early stage that Eurocopter Romania would be the company to perform the contract for the modernization of the Puma helicopters, and that the deal was still in place", the aforementioned press release said.