BAE Confirms It Is In Merger Talks With European Aerospace Giant EADS

BAE Confirms Merger Talks With EADS

Following days of media speculation, defence giant BAE systems has confirmed it is in talks about a potential merger with Airbus manufacturer EADS.

The merger, if it went ahead, would form the world's largest aerospace and defence company.

Under the proposed terms, European Aeronautic, Defence & Space (EADS) shareholders would own 60% of the new firm and BAE ones just 40%, prompting some commentators to question if the deal is more of a takeover than a merger.

A number of conditions have been put in place to act as safeguards, including special shares issued to the UK government.

The tie up would boast 48,000 staff in the UK alone and combined sales of £60bn.

A BAE spokesman told Press Association it was too early to confirm whether there would be any job losses, but stressed there was very little overlap between the two business activities.

Shares in military contractor BAE soared 11% on news of the talks, but EADS shares fell 10.5%.

BAE commented: "BAE Systems and EADS have a long history of collaboration and are currently partners in a number of important projects, including the Eurofighter.

"The potential combination would create a world class international aerospace, defence and security group with substantial centres of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA."

The city must now wait until 17:00 on 10 October to see if both parties can reach an acceptable solution.

The EADS is a consortium of aerospace and defence manufacturers from France, Germany and Spain, headquartered in Paris and Berlin.

London-based BAE meanwhile produces Astute nuclear-powered submarines and is the largest supplier of land vehicles to the US army.

In recent months, BAE has suffered a 14% fall in sales as a result of military spending in the US and UK being cut.

The GMB union, which represents BAE workers among many other sectors, said the merger news was a worrying development "as so much of our high-end engineering and manufacturing skills are embodied in this company".

Keith Hazlewood, national officer at the GMB, added: "The UK government must play a proactive role as this company contains the skills vital to the defence of our nation. It is as important to our defence as the armed services which shows what is at stake here."

A government spokesman told Press Association it was aware of the proposed merger and that given the nature of the companies' activities, it would ensure the UK's public interest was properly protected.

"We are working with the companies to ensure that this is the case. Given the market sensitive nature of transactions of this sort we would not want to comment further at this stage," the spokesman added.

The Financial Times reported that reactions in Germany and France were mooted; Media company Lagardère, a French shareholder that holds EADS’s chairmanship, suggested it was not convinced about the terms of the deal and in Germany, merger plans have "set off alarm bells" about the potential relocation of manufacturing and jobs, especially to the UK or France.

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