BAE, EADS call off merger plans

Vidya Ram London | Updated on March 12, 2018 Published on October 10, 2012

Among the issues that Germany, Britain and France failed to resolve was the size of the stake that would be held by governments.

BAE Systems and EADS have called off plans to create the world’s biggest aerospace and defense company, as governments failed to resolve their differences before a deadline on Wednesday.

Confirming the news, BAE Systems and EADS insisted that the merger plans had been based on “sound industrial logic,” and represented a “unique opportunity” to create a combination that would be stronger than the sum of their parts.

Questions about the fate of the talks to create a dual listed company – announced back in September – have increased over the past few days, amid signs that the differences between the three Governments were only increasing.

Among the issues that Germany, Britain and France failed to resolve was the size of the stake that would be held by governments, the nature of their involvement in the company, and even the location of the headquarters.

The deal would have also had to get the approval of the US’s intra-agency Committee on Foreign Investment. Investors, particularly in EADS, had also expressed their reservations about the deal, both in terms of its benefits and the valuation, though the companies insisted that had they successfully completed the discussions with the governments, they would have been able to make a strong case to shareholders.

The companies had agreed the commercial and legal structure of the merger, as well as the cost and revenue saving benefits, they said.

Shares of EADS rose sharply following the announcement, up 4.6 per cent in late afternoon trading in Paris, while shares of BAE Systems slipped slightly, amid speculation that the British aerospace and defense giant could now become a takeover target.

“There will almost certainly be greater pressure on BAE Systems than EADS to reveal a plan B strategy as soon as possible,” said Guy Anderson, a defense industry analyst at IHS Janes.

The failure of the talks highlights the challenges of creating an integrated European aerospace and defense firm, a plan first unveiled by the three governments back in 1997 as a means to improving the industry’s position in the global market, and promoting European security.

Published on October 10, 2012
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