EADS and BAE Seek Aerospace Super Merger

By on Friday, September 14th, 2012

The British arms manufacturer BAE Systems and European aircraft maker EADS have said they are in “advanced talks” to merge the two companies. The combo would be the biggest in the aerospace sector in more than a decade.

In a joint statement issued late Wednesday, Britain’s BAE systems and Airbus owner EADS confirmed market speculation about a merger, saying the talks envisaged BAE owning 40 percent of the enlarged group, with EADS holding a 60 percent majority stake.

“The potential combination will create a world-class international aerospace, defense and security group with substantial centers of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA,” the statement read.

Under the plan, the merged company would have a unified board and management structure, but the two companies would remain listed separately on their respective exchanges.

In addition, the companies propose issuing special shares to each of the French, German and British governments to replace their existing shares, while at the same time maintaining a certain degree of political influence on corporate policy.

The proposed deal would be the biggest in the aerospace and defense industry since the pan-European merger that created EADS in 2000, and establish an industrial giant with a combined market value of $48.8 billion (37.7 billion euros).

Linda Hudson, Chief Executive of the US arm of BAE Systems, said the merger makes sense given the downturn in defense spending in the US and Europe, as well as against the background of fluctuations in aerospace markets.

“It’s a win-win proposition for both companies in this environment,” she told the Reuters news agency.

The planned merger does not appear to have worried executives at the US aircraft maker Boeing, the combined group’s biggest rival.

“I have a pretty deep and abiding faith in our company’s strength, so I don’t see this as something that is going to threaten us fundamentally,” Boeing CEO John McNerney said Wednesday.

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