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BAE And Eads Seeking Merger

Wed Sep 12, 2012 5:35 pm

So it is confirmed that EADS and BAE are discussing and seeking a merger:

The European Aeronautics Space & Defence Co., the parent company of Airbus, is in advanced talks about a possible merger with British defense group BAE Systems.

BAE and EADS confirmed the discussions in a statement on Sept. 11 after they were initially reported by Bloomberg News. They said the merged group would be owned 60 percent by EADS and 40 percent by BAE. The two companies would remain separately listed, however, and some BAE holdings would be “ringfenced” to protect existing defense contracts.

Such a deal looks like a win for both companies. It would help EADS to limit its exposure to the highly cyclical civilian aircraft business, which accounts for the lion’s share of its sales and profits. BAE, for its part, faces declining defense spending in Britain and the U.S., its key markets. “It looks like a very interesting proposition for both [companies'] sets of shareholders,” says Zafar Khan, an aerospace analyst with Société Générale in London. BAE shares jumped more than 7.7 percent on the news, while EADS shares fluctuated but were mostly down.

I am sure the ownership structure will be the biggest sticking point/most difficult part of the process. Hopefully it could be cleared up and the nationalistic issues and requirements eliminated but I tend to doubt that. We'll have to wait and see.


[Edited 2012-09-12 10:48:29]
I don’t know that I am unafraid to be myself, but it is hard to be somebody else. -W. Shatner
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RE: BAE And Eads Seeking Merger

Wed Oct 10, 2012 3:52 pm

So the merger has been called off:

The merger hinged on the role of both the French and German governments in the combined firm. In the end, it was Berlin, rather than Paris, that proved the problem.

When asked if he had encountered more problems with the German than the French government, BAE CEO Ian King said: "That would be an accurate representation."

"We had clear red lines that we were not willing to go beyond relative to engagement and involvement of governments," King told reporters in London.

"If that was going to impinge on our ability to commercially run this new merged organization, and support and develop our existing business, then we wouldn't go to that point, and that is where we are today."

EADS said it was still not clear why Germany had objected.

I don’t know that I am unafraid to be myself, but it is hard to be somebody else. -W. Shatner

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