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BAE denies it is 'vulnerable' after EADS talks
11 October 2012BAE Systems has denied that it may be vulnerable to a takeover bid by a US firm or calls to break up its existing business following the collapse of talks with European aerospace firm EADS.
An agreement on a merger was not reached by the 5pm deadline on 10 October, with several reports blaming German Chancellor Angela Merkel for the failure of the deal. In particular, Germany's insistence that headquarters be based in Munich and that the country had shares equal to France were blamed for the collapse.
In their own analysis, both BAE and EADS later admitted that political issues had hampered the merger.
A report in The Daily Telegraph has since quoted an unnamed BAE shareholder as saying the company was now a "sitting duck".
"They have spent the last few weeks persuading people that they had to diversify their revenue stream away from defence in order to compete," the source said. "Now, they have to come up with a reason why they don't."
Mike Clancy, general secretary designate of union Prospect, said the collapse of talks raised "profound questions" for the defence industry in the UK, which he said was "in crisis".
"Thousands of skilled jobs have been lost at BAE over the last two years and we fear the loss of thousands more if BAE cannot expand its order book into new markets.
"BAE is a prime contractor for the Ministry of Defence and this move clearly reflects fears about the future profitability of those arrangements as defence markets shrink.
Clancy joined calls for a new Defence Industrial Strategy in the wake of the merger collapse.
"Now that ministers are liberated from their quasi-judicial role in the merger, they should spell out what plans they have to use the human and physical capital embodied in BAE to enhance the UK's manufacturing capacity," he said.
"This nation needs more manufacturing capacity, not less, and where government is the prime customer we cannot continue to operate in a policy vacuum."
Ian King, BAE's chief executive said he did not think the "flood gates" would open following the end of talks. "We haven't damaged the business by pressing ahead," he said.
A joint statement from King and BAE's chairman Dick Olver said that the firm did not regret the "bold" plan.
"BAE Systems is a strong independent company with a clear strategy and an excellent future as a standalone business," the two wrote. "That was true before we embarked on our talks with EADS and remains so today."
The deal would have created a firm "better than the sum of its parts", they said, potentially able to compete with US prime contractors on equal terms, but they added that it still had a "clearly defined strategy based around the UK, US, Saudi, Australian and Indian markets.
"We are the most internationally diverse of all the major defence companies," the statement said.
HAVE YOUR SAY
11 October 2012
Obvious statement coming here:
The government have a golden share in BAE specifically to block takeover if required.
So if the government so desired they could simply state BAE is not for sale to non-UK buyers and in so doing buy time for BAE to invest and plan for the future.
If I had anything to do with what BAE do next I would try and persaude the company to sell BAE Inc and use the proceeds to develop a civil regional jet program in the UK whilst we still have the skills.
BAE need to emulate Rolls Royce with the Trent, not what happened to GEC twenty years ago.
Martin Bayliss - Stroud
11 October 2012
BAE is still a viable company even without EADS as they are at present generating more profit. Only time will ultimately tell but this deal would have suited EADS more than BAE.
They wanted access to the US and saw BAE as the key, however that wasn't likely to happen with boeing set to challenge the new company as it would have been.
Even with the down turn in military spending there is still a market and they are still in profit.
Good old germany for blocking it with their demands, after the Indian Typhoon disaster they don't deserve to get their way
JC - UK
11 October 2012
BAe is no more at risk now than it was before the merger talks. All that has happened is that BAe has now stuck its head above the parapet and any potential for a leveraged buy-out has been well and truly highlighted.
However, as Martin has pointed out, any would-be owner has to satisfy UK Govt that the new owners will be beneficial to UK otherwise the 'Golden Veto' will be invoked.
But you do have to question whether the current board has BAe Systems & its shareholders as their main priority or their own bank accounts.... I know where my feelings are!
AW Employee - Yeovil
11 October 2012
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 ONE 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!!
Rather than, in effect, allowing BAE to be cannibalized by another country's defence firm(s)- with BAE's currently not-highly/un-profitable divisions substantially shrunk/closed/moved out of the UK and/or US- 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, (divisions of) Hitachi, Kawasaki, Hyundai & many other global companies make better strategic fits with BAE than EADS or Northrup, Lockheed, etc!!
If BAE wants more revenues to come from commercial- not military- aerospace ventures, why doesn't BAE just purchase 25%- 45% of EADS thereby avoiding EADS obtaining ownership of BAE through the currently proposed- misleadingly termed- 'merger' of the 2 companies??
Or, why doesn't the UK govt purchase 25%- 45% of EADS- appointing BAE (or another UK firm such as Babcock or Cobham)- as its proxy re future EADS issues??
Why is the UK printing hundreds-of-billions of 'quantitative easing' money - just to bail-out previously unethical banks and to make low-interest loans available to small businesses??
Roderick V. Louis, - Vancouver, BC, Canada