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Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 6:32 am
by F4N
To all:

There was an interesting article in FT.com regarding BAE's apparant intentions to merge with a US partner in order to become more involved in the US defense industry. While this is a rumor which has made the rounds for some time, it would appear that Airbus has made contingency plans to redeem the 20% minority stake held by BAE in case that merger partner becomes Boeing
(or if BAE were to be nationalized by the UK gov't).

While it is understandable that Airbus would want to protect trade secrets from its rival, it would also seem that this contingency is not applicable to other mergers with other US aerospace companies, i.e., Northrup or Lockheed, for example. Should a merger between BAE and Lockheed take place, this would place Lockheed(one of Boeing's old rivals)as a 20% owner of Boeing's new rival; Airbus. An incredible irony...and how complicated would that be seeing Boeing subcontracts a great deal to other US majors.

Thoughts and comments on the future of civil airframe production if Boeing has a minority shareholder of it's major competitor "in the neighborhood".

regards,

F4N

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 6:59 am
by N79969
I suspect that neither Airbus or Boeing would be real happy in that situation. Especially in light of the recent scandal in which ex-Lockheed employees used proprietary information to help Boeing. In the end though, I think they would find a way to keep their relationships working and both airframers would insist of safeguards within the new equity holding supplier. I would be curious about how antitrust authorities would look at the new situation.

The actual identity of the new BAE owner will make all the difference.

Good idea for a discussion.

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 7:47 am
by F4N
N79969:

When I read the article, it occurred to me that such a merger would cause significant turmoil in both the civil and defense side, especially if the US partner is not Boeing. Since Bae has significant positions in say, J35 and the various Harrier programs, the legal intricacies(which may appeal to you) would be substantial.

You are probably quite correct in assuming that the antitrust folks at DoJ and the EU would look at this long and hard. I would also imagine that various politicians would find it hard to resist meddling considering that Airbus is a prestige concern in Europe and the prospect of a non-European equity holder would have little appeal. OTOH, Airbus could use such a stake holder as a platform for oft mooted US manufacturing facility, thus depriving Boeing of its' much-cherished "domestic" supplier status.

More food for thought...

regards,

F4N

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 8:37 am
by Ruscoe
In the real business world it should not matter. The idea is to make money, not to be an instrument of National Pride.

Ruscoe

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 8:59 am
by N79969
F4N:

I think if technology bounced between the US and UK after a merger, there would be problems but I believe they could be overcome relatively easily. I think both countries share a common view when it comes to the 'good' guys and 'bad' guys around the world.

However if US and continental European interests come to a head through BAE projects, it would become very complicated. There is a very different worldview on the continent.

Do you know if EADS share or ADR are available in the US? There may well be US ownership already albeit indirect.

The acquistion of BAE is going create numerous complex issues that I cannot think of right now.

Ruscoe:

I see your point but I think there are limitations in the area of defense. While the label "strategic industry" is typically slapped on any industry that seeks protection from foreign competition, I think there are legitimate examples where it actually applies. For instance, most nations have an interest in retaining indigeneous capabilities in weaponry, some food (most often abused), communications, and certain kinds of manufacturing.

I think Boeing and BAE are very important national defense in their respective countries. If we were talking about manufacturers of cola or even airline ownership, I would agree with you 100%. From what I understand, Australia and New Zealand have deregulated their airlines in a way worthy of emulation.

[Edited 2003-07-06 02:19:30]

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 9:20 am
by 777236ER
Jesus, for the past decade BAe (small "e", damn it) has been on a constant trail of mergers, take overs and other, ultimatly pointless feats! Coupled with this reductions in production and devlopment in EVERY area of their business!

You start to think that BAE would be more suited being a bank than being an aerospace manufacturer.

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 9:42 am
by F4N
N79969:

There is no US ownership(from what I can tell) of EADS in any form. While I agree with your point about US/UK technology transfer issues, BA"e"(for 772236ER)is involved in numerous multi-national projects which would conflict with those of US firms, Typhoon, Gripen, Meteor, ASRAAM come to mind. I'm not sure how easily the partner nations would accept US involvement.

Ruscoe:

In the business world it shouldn't/doesn't. However, no gov't would let such a merger pass without scrutiny. This would be further complicated by the nature of BAe's involvement in European defense programs and the sad state of US/EU relations.

772236ER:

Yes, BAe has song this song before, but it appears as though they believe that US defense business presents a far more reliable revenue stream than the tenuous nature of multi-national projects in Europe. Look at the very protracted gestation period that A400M has had. Bae also has something that few foreign firms enjoy in the US, the confidence of the Pentagon.
Perhaps they will take the plunge this time.

regards,

F4N

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 9:37 pm
by dynkrisolo
777236ER:

Do you need a guy from the other side of the pond to tell you that BAe (British Aerospace) does not exist anymore? It is called BAE (with a capital E) Systems now.  Big grin

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Sun Jul 06, 2003 9:50 pm
by 777236ER
Yes, yes I know  Crying

That still doesn't mean the recent acquisition-mad trend at BAE is a good thing.

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Mon Jul 07, 2003 2:17 am
by STT757
Airbus/EADS has been trying to forge a working relationship with Lockheed/Martin on several projects, nothing has come about yet.

The projects EADS/Lockheed Martin have tried to team up on are..

The US Navy's MMA aircraft which will replace the P-3 and EP-3 fleet, EADS/Lockeheed were pitching a A320/19 that would be fitted out in the US by Lockheed Martin.

Boeing seem to have the inside track with their BBJ MMA.

EADS/Lockheed Martin also are still planning on teaming up to again offer the A330 tanker to the US Airforce, the USAF said they will consider the A330 as part of future orders. They have 550 KC-135s that need replacing, it's possible that all the replacements would not be KC-767s.

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Mon Jul 07, 2003 7:06 am
by eg777er
Actually, technically it's not "BAe", not "BAE Systems" but in fact "BAE SYSTEMS". (There's my pedantry over for the evening!).

I would imagine, if this came about, that "Airbus UK", which is the bit-in-Britain-that-makes-thy-wings would be spun-off as a seperate company, or maybe sold back to EADS (i.e. Airbus UK would be owned by EADS but retain management/design/construction in the United Kingdom) and BAE SYSTEMS would do what they have wanted to do for decades, and get out of the commercial aircraft business.

Having spoken to people within the organisation over a number of years, this is pretty likely. You only have to look at the continual retrenchement from commercial aircraft building (AI (R), 146/RJ-X etc.) to see that BAE SYSTEMS has no business in non-military operations.

But don't worry, Airbus will continue to play a big part in the UK and vice-versa. Tony Blair only recently (Friday) opened the new £350m A380 wing plant (Airbus Broughton West).....that's a serious investment any new owner will maintain.

RE: Bae,posible Mergers And Its' 20% Stake In Airbus

Posted: Thu Jul 10, 2003 5:00 am
by N79969
EADS wants to list in the US. I wonder how this may affect a possible merger.

http://biz.yahoo.com/rf/030709/arms_eads_camus_1.html