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BAE merger with EADS scrapped
10 October 2012
The success of the deal required approval from the British, French and German governments and would have created a £28bn European defence giant to compete with large US firms in new markets.
The governments reportedly disagreed over issues including limits on shares in the merged company, the location of headquarters, jobs guarantees and security issues.
In a statement, the two companies said "discussions with the relevant governments had not reached a point where both companies could fully disclose the benefits and detailed business case for this merger".
"…Notwithstanding a great deal of constructive and professional engagement with the respective governments over recent weeks, it has become clear that the interests of the parties' government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger," the statement said.
"BAE Systems and EADS have therefore decided it is in the best interests of their companies and shareholders to terminate the discussions and to continue to focus on delivering their respective strategies."
BAE chief executive Ian King said: "We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders. We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world class and complementary businesses to create a world leading aerospace, defence and security group."
Tom Enders, chief executive of EADS, said: "It is, of course, a pity we didn't succeed but I'm glad we tried. I'm sure there will be other challenges we'll tackle together in the future."
After the talks collapsed, union Unite urged the government to buy a stake in BAE and strengthen its current 'golden share' arrangement with the company.
Ian Waddell, the union's national officer for aerospace and shipbuilding, said: "There was an industrial logic to the merger, but national and political interests proved to be the stumbling block. The UK government now needs to strengthen its 'golden share' and send a powerful message that it backs British manufacturing and BAE systems.
"Short-termism cannot be allowed to govern BAE's future. BAE management in the past has made some crucial wrong decisions, such as selling its stake in Airbus in 2006. We need to ensure the company plans for the long term and that short-term investor pressure is balanced with employee representation on the board.
"BAE is a great British company. The government needs to follow the example of Germany and France where they pursue an active industrial policy and adopt an approach that safeguards the highly skilled jobs which are critical to our country's defence."
Shadow defence secretary Jim Murphy said that the failure of the talks showed that Britain needed a new defence industrial strategy "now more than ever".
"Now that the answer to the future of UK defence manufacturing cannot be found in France and Germany it must lie in Britain and other established markets," said Murphy.
"Those Conservative MPs who were warning against the involvement of French and German governments must now demand a more active industrial strategy from the British government.
"There will be huge worry and uncertainty about the future of defence jobs, thousands of which have already been lost. Ministers must urgently convene talks with industry to develop a fresh defence industrial plan to give certainty to companies and workers."
HAVE YOUR SAY
10 October 2012
Overall, good news. I'd agree with Murphy's view (despite the dubious nature of his party's disastrous years in charge).
However, I feel that BAE is too big and too diverse. I would like to see shipbuilding in particular managed by another British business with a focus only on that market. I feel this would lead to greater potential for international sales in the way that Vosper and Vickers used to do in the past.
A salient point about this deal was that the only synergy repeatedly referred to was civil/defence aviation assets. This in itself points to the fact that BAE should perhaps be focused in this area and other British companies should handle other areas.
Focused companies are always more successful than those which have grown too fat.
Michael - Hertfordshire
10 October 2012
Why executives at BAe cannot see that what is needed is to somehow by hook or by crook regain a foothold in commercial and civil aviation so as not to depend wholly on the military and defence sectors which as i have said before history tells us is only ever a temporary increase.
Pardon my sceptism but now that the deal is not presently going through i wouild not be surprised to learn in the not too distant future that negotiations have been completed behind closed doors away from the media glare and this is great news for britain for europe and for jobs.
andy - solihull
10 October 2012
The board of BAE made a big mistake when they decided to pull out of civil aircraft and concentrate soley on defence, thinking that future prosperity was going to be based around continuing big orders from the MoD and the Pentagon. In these days of global cuts in military spending however, unlike BOEING and EADS with full order books for airliners, BAE is finding itself running low on military orders. Returning to civil aircraft is unlikely to happen, as setting up new design teams and production facilities would take many years to accomplish. Therefore, unless the Government gives some urgent support to BAE with new defence contracts, they will continue to scrabble around looking for a another company with which to merge or link-up with.
MikeyB - Merseyside
10 October 2012
GOOD.
JC - UK
11 October 2012
The future??:
Considering the purported logic for EADS' failed takeover of BAE was to balance BAE's over-reliance on military with EADS' mainly civilian products & services, then BAE WOULD NOT BE A GOOD FIT WITH 1 OF THE US's DEFENCE GIANTS... unless of course there is an- unspoken- BAE board of directors' objective to create the false appearance of justifiable reasons (redundancies) to substantially downsize/close many of BAE's existing facilities!!
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Rather than, in effect, allowing BAE to be cannibalized by another countries' defence firm(s)- with BAE's currently not-highly/un-profitable divisions substantially shrunk/closed/moved out of the UK- wouldn't a more appropriate strategy be for BAE, the UK govt- & reps of UK aerospace business associations- to be strategizing how BAE could better balance its portfolio of products and services by acquiring UK- and overseas- non-military- IE: civilian- companies???
Bombardier, Thales, Finmeccanica, (parts of) Hitachi, Kawasaki, Hyundai & many other global companies make better strategic fits with BAE than EADS or Northrup, Lockheed, etc!!
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Instead of being taken over & dismembered, BAE would benefit from competent, far-sighted international corporate partners- along with UK govt (& international Sovereign Wealth Fund?) investments- to further develop, DIVERSIFY & market its portfolio of products & services, particularly its green technologies & public/commercial transit types*...
* BAE Systems HybriDrive® hybrid electric drive propulsion system
Roderick V. Louis - Vancouver, BC, Canada
11 October 2012
Michael, have to agree, is BAE another company "too big" to fail? Splitting off certain business areas into other UK companies would be an excellent start, perhaps coupled with a clear and guaranteed UK defence order book boosted by money moved from the foreign aid slush fund... If high tech manufacturing is the UK's future then this is a no brainer....
Matt - Herts
11 October 2012
BAE's strategy of selling off/closing its UK manufacturing capability and expanding through foreign acquisitions has failed- it needs to invest in new UK capability and new markets- how about taking a stake in Reaction Engines?
Ian Skinner - Enfield
11 October 2012
I have to agree with Roderick on a possible tie up with Finmeccanica and/or perhaps Bombardier.
The biggest mistake BAE has made was selling the 20% stake in Airbus if they could buy that back it would be best of all if its even possible.
Graham - High Wycombe
11 October 2012
andy - solihull
Makes sense to me, start building Commercial aircraft again, these may lead to other Military spin off aircraft, MPA, tankers, transport as well as cvil airliners.
Rob - Telford