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EADS merger collapses - what now for BAE?

Wednesday, October 10, 2012 - 02:23

Oct.10 - After $45 billion merger talks between Airbus' parent company EADS and British defence firm BAE Systems broke down, where now for BAE? Joanna Partridge reports.

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After weeks of talks - the EADS and BAE Systems deal is off. Airbus' parent company and the British defence firm had been discussing a $45 billion merger - it would have created the world's biggest aerospace and arms group. But the obstacles proved insurmountable and they didn't request extra time to continue discussions. EADS and BAE were always going to have their work cut out getting the governments of Britain, France and Germany to agree to their plans. That - said BAE - was the problem - all of their interests could not be reconciled. The stakes France and Germany would have held in the combined company were key. Britain needed assurances any European government ownership would not upset their major client, the U.S. government. EADS suggested Germany opposed the deal, despite denials from their Defence Minister, but it's not clear why. Its shares briefly jumped by 5% on the news, while BAE stock rose slightly before falling by a percent. BAE"s CEO says he doesn't want any alternative partners. But defence budgets are shrinking and Ed Salvesen from Brewin Dolphin says he may have to look around. SOUNDBITE: Ed Salvesen, Equity Analyst, Brewin Dolphin, saying (English): "Management have now said they are kind of open to negotiations, this was very much a push that a lot of investors had been pushing for. There weren't very many options for BAE going forward, some of their end markets were declining and being squeezed. So now a few commentators will push for a join-up with potentially a U.S. peer." A future EADS tie-up hasn't been ruled out, but David Reeths from IHS Jane's also thinks a cross-Atlantic tie-up might work. SOUNDBITE: David Reeths, IHS Jane's, saying (English): "I know a lot of people have been looking to the U.S. for a potential partner and large firms like General Dynamics, Northrop Grumman or even Raytheon have been mentioned in some of the reports, but unfortunately those firms already have significant presence in the United States." The merger was seen as a good move for BAE. While it says it doesn't consider itself a takeover target, the defence firm's management will certainly be considering ways to safeguard jobs and BAE's future. Joanna Partridge, Reuters

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EADS merger collapses - what now for BAE?

Wednesday, October 10, 2012 - 02:23