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BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 9:46 am


The following article from today’s Sunday Times (UK) may be of interest.


What ramifications would this have on the Airbus/Bae relationship? The articles mentions that Bae’s 20% stake in Airbus would be sold. I presume they would also cease producing Airbus wings? Quite a kick in the teeth it would be!

Goodbye SR-LX MD-11 / 6th of March 1991 to the 31st of October 2004
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RE: BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 9:51 am

Any other way to post the article? I get blocked with a members only window.
I'm not a real aeronautical engineer, I just play one on Airliners.net.
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RE: BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 9:54 am


Sorry, here it goes:

Copyright: The Sunday Times

BAE weighs up £20bn merger with Boeing
Dominic O’Connell

BAE SYSTEMS has held exploratory talks with Boeing, the American aerospace giant, about the possibility of merging to create a £20 billion transatlantic defence group.
Senior bankers held talks on behalf of the two companies in the autumn, before BAE’s shock December profit warning. It is understood the talks have been put on hold, but sources close to BAE said both sides remain eager to cement a deal if possible.

News of the discussions will spice up BAE’s negotiations with the UK government over a £10 billion contract to build two aircraft carriers. It will also fan rancorous arguments over how cost overruns of up to £1 billion on earlier contracts should be apportioned.

A decision on the carriers — the most powerful warships ever built for the Royal Navy — is expected at the end of the month. BAE is vying with Thales, the French defence group, for the contract. Comments last week by Geoff Hoon, the defence secretary, that BAE is no longer a British company, have fuelled industry suspicions that Thales is favourite for the job. If Thales were selected, it is likely that ministers would attempt to mollify BAE with the promise of a significant slice of work.

Some industry executives believe BAE remains favourite. “Can you really imagine a minister standing up in parliament to say our new aircraft carriers are going to be made by the French?” one executive asked.

BAE yesterday declined to comment on its relationship with Boeing, but said it had made no secret of its long-term ambition to increase its exposure to the Americans.

A senior investment-banking source said the disclosure of the talks might be designed to help BAE in its various negotiations with the Ministry of Defence. “It’s a handy way of saying, if you don’t treat us right, we’re off.”

It is understood that negotiators envisaged BAE selling its 20% stake in Airbus, the European aircraft manufacturer. Sir Dick Evans, BAE’s chairman, would have retained a senior role at the merged group.

Defence industry sources said that while a merger between Boeing and BAE was likely in the long term, there were several obstacles to a speedy deal. BAE’s depressed share price — down from a 52-week high of 393p to 126p — would be unlikely to give it the proportion of the merged company its shareholders would require to back the deal.

It was also not clear whether the British government would give its blessing. “There is no clear view of the defence industry within Whitehall,” one senior industry executive said yesterday. “Some departments see defence as an absolutely strategic industry that must be preserved, some don’t, and there is a range of views in between.”

A merger would create an aerospace and defence behemoth with a market value of more than £20 billion, annual sales of £45 billion and nearly 300,000 employees. The combined group would control not only half of the world’s civil aerospace market through Boeing’s commercial aircraft group, but would also have a hand in virtually every major western defence project, from the “son of Star Wars” missile-defence programme to the provision of rifles for the British Army.

A deal would have significant political ramifications, and be interpreted by many as Britain turning its back on Europe.

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RE: BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 3:10 pm

I have a feeling that both the US and EU would be very wary of approving such a deal.
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RE: BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 4:23 pm

Pretty sure the government would block it, BAE are the most important defence contractor by far, and the government have done well on repayments to launch aid on previous Airbus projects, they would not want to lose that, if BAE sold their Airbus stake, the work would move to probably Germany.
But we are stupid in the UK, our self-inflicted loss of capability in high-tech industry is well known.
While Thales will do virtually all the work on the CVF carriers in the UK, can you imagine France allowing a foreign (35% state owned-as Thales is) contractor winning such an important project?
Of course not, and neither would the US. We actually believe all this 'total free market' stuff, no one else does, not matter what lip service they pay to it.
But as I said, we ARE stupid enough to.
I think Hoon has fired warning shots across BAE's bows, the Ministry Of Defence are fed up with BAE's failure to deliver anything on time and on budget, Hoon did retract his statement about BAE mentioned above a few days later, but BAE's push to exclude others from major defence projects has irritated Whitehall no end.
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RE: BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 4:43 pm

I presume that for Commercial aircraft at least, BAE would just swap Boeing work for its Airbus work.

Would BAE have any SST expertise that Boeing doesn't?

Can BAE make wings for Boeing cheaper than Boeing can itself.

I for one have always thought BAE would be much better off getting into bed with the Americans rather than the Europeans.

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RE: BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 4:50 pm

Heh, yes, BAE has successfully built and sold an SST in the past.

Boeing doesn't even make the wings for the 777. They're made in Japan by Kawasaki I believe, but definitely made entirely in Japan.

The cancellation of the A380 wing project would be a massive blow to the program, and would probably cost BAE millions and millions to back out of anyway. It would be almost impossible for them to do.

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RE: BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 6:41 pm

After scrapping the SC, the last thing Boeing will do is go for the much more difficult SST.
BAE is also heavily involved in the Eurofighter, its basically a BAe design.
As well as a significant stake in the Gripen fighter, both of these compete with Boeing products.
But BAE is also involved in the JSF, Lockheed Martin have used BAE's advanced production knowledge in the project, BAE is the major only non-US contractor on this programme, they've been involved since the earliest stage of the project, this has caused some tension with BAE's European partners. Though the UK forces see the Eurofighter and JSF as complementary, however, post 2012, they will compete for exports.
Taking all this into account, it is hard to see a BAE-Boeing merger, BAE would be left with virtually nothing.
I think all this is a reflection of BAE's current problems, but BAE winning the CVF contract, the biggest UK defence contract ever, as well as a likely top up order from the RAF for new Hawk trainers, should improve BAE's share price no end.
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RE: BAE Weighs Up £20bn Merger With Boeing

Sun Jan 19, 2003 6:44 pm

It would be typical of the UK, just as Airbus turns in its best performance against Boeing, to pull out of the partnership  Insane

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