BAE, EADS Discuss Merger

Discussion in 'Europe and Russia' started by Zebra, Sep 13, 2012.

  1. Zebra

    Zebra Senior Member Senior Member

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    Sep. 12, 2012 - 12:34PM |
    By ANDREW CHUTER

    European aerospace and defense giants BAE Aerospace and EADS have confirmed they are in merger talks. Under the arrangements now under discussion, BAE would own 40 percent and EADS 60 percent of the enlarged group, the British-based company said in a statement Sept. 12.

    “This potential combination would be implemented through the creation of a dual listed company structure under which both companies would operate as one group by means of equalisation and other agreements but would be separately listed on their existing exchanges” said the BAE statement.

    EADS confirmed in a statement that the talks were underway but cautioned that the “possible combination is subject, amongst other things, to the approval of the Board of EADS and there can be no certainty that these discussions will lead to a transaction”.

    Under the structure being discussed, BAE and EADS envisage that certain of their defense activities would be ringfenced, with governance arrangements appropriate to their strategic and national security importance, particularly in the U.S., given the importance of that market to the enlarged group, said the statement......

    full story: BAE, EADS Discuss Merger | Defense News | defensenews.com
     
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  3. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    EADS discuss taking over BAE

    BAE, EADS Discuss Merger

    European aerospace and defense giants BAE Aerospace and EADS have confirmed they are in merger talks. Under the arrangements now under discussion, BAE would own 40 percent and EADS 60 percent of the enlarged group, the British-based company said in a statement Sept. 12.

    “This potential combination would be implemented through the creation of a dual listed company structure under which both companies would operate as one group by means of equalisation and other agreements but would be separately listed on their existing exchanges” said the BAE statement.

    EADS confirmed in a statement that the talks were underway but cautioned that the “possible combination is subject, amongst other things, to the approval of the Board of EADS and there can be no certainty that these discussions will lead to a transaction”.

    Under the structure being discussed, BAE and EADS envisage that certain of their defense activities would be ringfenced, with governance arrangements appropriate to their strategic and national security importance, particularly in the U.S., given the importance of that market to the enlarged group, said the statement.

    Discussion with various governments about the possible merger are already underway. EADS is partly owned by the French and German governments. BAE is a fully publicly quoted company, although the British government does have a golden share in the operation.

    The statement said the parties envisage issuing special shares in BAE Systems and EADS to each of the French, German and U.K. governments to replace the existing U.K. government share in BAE and the stakeholder concert party arrangements in EADS.

    The two sides are required by takeover rules to announce whether the deal will go ahead by Oct. 10, although that deadline can be extended.

    In Paris, the prospective deal was seen as solving two problems for EADS at a stroke, namely, a move toward consolidation of the Eurofighter Typhoon combat jet and access to the U.S market.

    “For EADS, the two weaknesses are addressed: access to the American market and the beginning of rationalization of military aviation,” said Jean-Pierre Maulny, deputy director of think tank Institut des Relations Internationales et Stratégiques.

    The Eurofighter program is in difficulty as the four home countries — Britain, Germany, Italy and Spain — are delaying orders for the jet, which is also struggling to find an export success.

    “The hardest part of consolidation in the defense industry is industrial rationalization,” Maulny said, when asked about a possible shutdown of the four Eurofighter production lines.

    A deal with BAE would lessen EADS’ dependence on the Airbus airliner business, which delivers the bulk of sales and profit for EADS.

    “Today, it’s 75-25,” Maulny said, referring to the balance of commercial and military business at EADS.

    EADS sees itself as weak in the military area and a merger with BAE would strengthen that side, although given the wide portfolio it is not certain EADS would keep all its businesses, Maulny said.

    EADS managers see the German defense component in the Cassidian defense and security division as weak.

    In defense electronics, however, BAE is not strong. “It’s not Thales,” Maulny said.

    Regarding European antitrust concerns, it is unlikely the European Commission would block a deal, he said. There is a concentration of business in Europe, “but at the world scale, it is at a subcritical level,” he said.

    “I don’t think it poses a problem,” Maulny said.

    Alex Ashbourne Walmsley, of London-based Ashbourne Strategic Consulting, however, warned that the merger proposal could face a rough ride from U.S. authorities as a result of the access EADS could get to local markets through a tie-up with BAE.

    “The U.S. administration might have some difficulty with a company whose owners include the French and German governments unless the merged company can show conclusively that BAE’s substantial operations in America can be operated independently,” she said.

    The U.S. Defense Department warned local prime contractors in 2011 it was not interested in supporting further consolidation at the top of the sector, and it remains to be seen whether BAE, with its huge footprint in the U.S. market, might fall foul of that position.

    In some ways, the merger discussions almost turn the clock back 14 years to when the British company was in advanced merger talks with what was then the German defense and aerospace company DASA.

    Those talks fell apart when what was then British Aerospace opted to acquire local British rival GEC Marconi in order to shore up its position in the U.K. and gain GEC’s sizeable defense interests in the U.S. market.

    DASA responded by merging with France’s Aerospatiale into the company which is Dutch registered but predominately Franco-German owned EADS.

    BAE sold its 20 percent stake in the Airbus operation it owned alongside EADS in 2006

    The combination of the two concerns would create the world’s largest aerospace and defense contractor, a position currently held by Boeing. Together, the European companies had revenues of $93 billion in 2011 compared with Boeing’s total of $68 billion.

    BAE, EADS Discuss Merger | Defense News | defensenews.com
     
  4. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    That would be great. A Franco-German company taking over BAE... the wankers would never live it down.
     
  5. sob

    sob Moderator Moderator

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  6. sob

    sob Moderator Moderator

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  7. sob

    sob Moderator Moderator

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    Re: EADS discuss taking over BAE

    What impact would this have on the Eurofighter? Could somebody shed some light on this.
     
  8. sob

    sob Moderator Moderator

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    Mods there is another thread started by Armand, could you please merge with this thread.
     
  9. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Re: EADS discuss taking over BAE

    It would consolidate the Eurofighter programme making it easier to make decisions.
     
  10. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Re: EADS discuss taking over BAE

    What this deal would effectively do is add the UK to the Franco-German company making it the largest in the world. Europe wants consolidation so the only real hurdle would be the US approving BAE being taken over by France/Germany. They matter because over half of BAE business is in North America.
     
  11. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Last edited by a moderator: May 10, 2015
  12. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    EADS-BAE tie-up would hit Finmeccanica - Mediobanca
    Thu, 13/09/2012 - 09:24

    MILAN (Reuters) - A tie-up between EADS and BAE Systems would limit Finmeccanica's ability to compete in Europe and leave the Italian aerospace and defence group with French aerospace and defence electronics specialist Thales as the only merger option left, Mediobanca analysts said on Thursday.

    BAE Systems and EADS said on Wednesday they were in talks to create an industry leader that would overtake U.S. rival Boeing in sales and contend with cutbacks in defence spending in Europe and the United States.

    "The news is negative for Finmeccanica because it signals a dramatic situation in expectations for defence budgets ... and would make it very difficult for Finmeccanica to get orders in France, UK, Germany," Mediobanca said in a note on Thursday. "In terms of potential M&A Finmeccanica has only one option left: Thales."

    EADS-BAE tie-up would hit Finmeccanica - Mediobanca | Interactive Investor
     
  13. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    The end is near...
     
  14. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    It does not look like the French government is behind this deal. BAE is plying for it to save itself from plunging defence budgets and Germany wants to add defence major to its portfolio. Smaller French companies will be edged out and according to GoF, there is "no industrial benefit."
     
  15. Zebra

    Zebra Senior Member Senior Member

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    Sep. 13, 2012 - 02:21PM |
    By TOM KINGTON

    ROME — Italy’s Finmeccanica has reacted positively to news of BAE Systems’ potential merger with EADS, rebutting concerns that it would come under threat from the new entity.

    “The announcement of discussions regarding a possible combination of the businesses between EADS and BAE Systems represents an important step in the consolidation of the European defence industry,” the firm said in a statement released Sept 13.

    Moreover, the firm added, the move represents “an even more significant step in geo-political terms, taking into account the two bilateral agreements recently undertaken between France and Germany and between France and the United Kingdom.”

    BAE and EADS confirmed they were in merger talks Sept 12, with BAE to own 40 percent and EADS 60 percent of a possible unified firm, and with the French, U.K. and German governments owning shares.

    Italian media on Sept. 13 suggested the move would leave Finmeccanica outflanked by the new aerospace and defense giant in Europe.

    But Finmeccanica added in its statement that it has “promoted and participated in the integration of European defence, seeing this development as strategically important,” and “has established consolidated partnerships with both companies in the industrial, technological and commercial field, which will continue with the combined entity.”

    One source close to Finmeccanica said that the firm was already a minority partner with BAE and EADS in the missile house MBDA and on the Eurofighter program.

    “So if they team up, nothing changes,” he said. “If two of our partners on Eurofighter merge, they become stronger, and this could be positive for the program in international markets.”

    “There would be no short-term consequence for Italy, although it would require Finmeccanica to accelerate its focus on its core business,” said Michele Nones, head of the security and defense department at the Istituto Affari Internazionali, a think tank here that is part funded by the Italian Foreign Ministry.

    Finmeccanica is seeking to shed noncore civil activities and restructure its defense and aerospace activity.

    Nones added that an EADS-BAE merger would move Europe from having four major groups — BAE, EADS, Finmeccanica and France’s Thales — to having one giant group trailed by Finmeccanica and Thales.

    “It simplifies life for Finmeccanica,” he said. “Hitherto the firm has had a problem with size, and competing with the other groups. Now the new merged group would be unreachable, meaning that even if Finmeccanica sheds some activities, it will only be comparing itself to Thales.”

    Finmeccanica’s former CEO, Pierfrancesco Guarguaglini, who stepped down last year amid corruption allegations, was less optimistic, telling an Italian news agency that Finmeccanica would need to react to the planned merger “either by looking at who else is suffering a blow from this operation, or by opening talks with [BAE and EADS].” That would require “imagination” and “government coordination,” he added.

    As CEO in 2005, Guarguaglini suggested Finmeccanica could tie up its electronics activities with Thales.

    Finmeccanica Positive on BAE-EADS Talks
     
  16. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    BAE-EADS merger would advance Europe's military goals

    BAE-EADS merger would advance Europe's military goals - Yahoo! Finance

    BRUSSELS (Reuters) - Merging Britain's BAE Systems with EADS to create a global aerospace and defense giant would be a significant boost to European leaders' ambitions for a more efficient defense industry.
    The European Union has long sought to foster more cross-national cooperation on defense projects in Europe to plug holes left by shrinking military budgets and to eliminate wasteful duplication of effort.
    NATO too is urging members to work together on projects to squeeze maximum value from defense spending that many Western countries have slashed because of the financial crisis.
    The combination of Britain's BAE Systems (BA.TO) and Franco-German dominated EADS (EAD.PA) to form the world's biggest aerospace company could be a big step towards achieving those goals.
    "We would welcome any reinforcement of the European defense industry and its competitiveness on the international stage," one European Union source said.
    Another said the EU backed consolidation of the European defense sector. "We do not favor fragmentation," he said.
    The companies have combined sales of $93 billion, with products ranging from Airbus commercial planes to Typhoon warplanes and nuclear-powered submarines.
    EU officials would not take an official position because of sensitivities around the proposed merger, which will need the approval of the EU's competition watchdog. NATO declined comment, saying the proposed tie-up was a commercial issue.
    The French and German governments have yet to make clear if they will back the merger and it could yet run into political obstacles over concerns about protection for jobs, defense of national interests, and the impact on competitors.
    Under the proposed deal, special shares in BAE and EADS would be issued to each of the French, German and British governments to replace the British government's existing "golden share" in BAE and the stakeholder deal that maintains a Franco-German balance of power in EADS.
    The British government has said it is working with BAE and EADS to ensure the merger serves the public interest, but senior British lawmakers say Prime Minister David Cameron backs the deal.
    "In the broadest terms, this merger does enact what many European governments... have been saying for a long time - that in order for the European defense industry to remain competitive in the long term it needs to consolidate," said Clara Marina O'Donnell, a defense expert at the Centre for European Reform thinktank.
    BETTER VALUE
    Nick Witney, a former chief executive of the European Defence Agency, an EU body dedicated to improving the bloc's defence capabilities, said he thought both EU and NATO leaders would be pleased with the firms' plan to merge.
    "This must be a way to improve the efficiency of what we get out of our taxpayer euros and pounds in Europe," said Witney, who is now at the European Council on Foreign Relations thinktank.
    Falling defence budgets mean that hardly any European government, even the biggest military spenders such as Britain, which currently has no aircraft carriers flying fast jets, can deploy a full range of military capabilities.
    That has led to increasing stress on European governments working together to share capabilities and plug gaps. Britain and France signed a far-reaching defence agreement in 2010.
    NATO is promoting a policy of "smart defence" which encourages members to cooperate in developing and maintaining military capabilities. The alliance approved an initial package of multinational projects at its Chicago summit in May.
    In a similar initiative, EU defence ministers agreed last November to pool resources in 11 defence fields ranging from mid-air refueling to field hospitals.
    The EU's internal market commissioner, Michel Barnier, said last November that EU states must cooperate to develop vital military capabilities, keep a defence industry base in Europe and allow European defence industries to stay competitive.
    The United States, now increasingly looking towards Asia, has long been frustrated by what it sees as Europeans' refusal to shoulder a fair share of the burden of their own defence.
    Last year, in a parting shot at European allies, former U.S. Defense Secretary Robert Gates said NATO risked "collective military irrelevance" unless alliance members reversed declining capabilities.
    Europeans led NATO's Libya campaign last year, but depended heavily on the United States for air-to-air refueling, drones and surveillance.
    WASTE
    Defence experts say Europe still allocates a significant amount of money to defence but spends much of it wastefully. Despite European integration in other fields, defence has remained a largely national issue, with countries jealously guarding their competences and reluctant to depend on others.
    European governments often pursue competing defence projects or order different versions of equipment rather than agreeing to buy the same version.
    In an interview on the European Defence Agency's website, Frank Haun, chief executive of German military vehicle maker Krauss-Maffei Wegmann, said Europe remained a patchwork in defence.
    "Is there really a necessity for six types of 8x8 (eight-wheel drive) vehicles (to be) developed and produced within the European Union?" he asked.
    A combined BAE Systems and EADS could be a powerful driver for standardization among the armed forces of Western Europe's three biggest defence spenders, Britain, France and Germany.
    "If the suppliers come together then perhaps it will be easier to decide on common capabilities for European armed forces... and if we are doing common capabilities, we might even move towards slightly more unified policies and strategies as well," Witney said.
     
  17. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Re: BAE-EADS merger would advance Europe's military goals

    I don't see how we can approve this merger. It will put France's independent MIC in a corner competing against its own giant. 40% shares to a faltering BAE in exchange for money maker Airbus is a ripoff. I would probably back it IF their stake was 25%.
     
    Last edited: Sep 17, 2012
  18. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    BAE-EADS. I wonder if they will call the merged entity BEADS or something like that.
     
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  19. anoop_mig25

    anoop_mig25 Senior Member Senior Member

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    what would be effect of merger on defence markets specailly fighter aircrafts of france /england or europe
     
  20. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Eurofighter is already a BAE/EADS project so I don't really see a change in the moment. It is future that is threatened for Dassault and Saab. An EADS/BAE merger would certainly be responsible for any 5th gen fighter programme and likely takeover UAV development.
     
  21. asianobserve

    asianobserve Elite Member Elite Member

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