26 Sep 12. Governments should not try to wield influence over a merged
EADS (EAD.PA) and BAE Systems (BAES.L), EADS boss Tom Enders said on Wednesday, highlighting the political tensions that could torpedo the planned $45bn aerospace tie-up. Enders, who also faces a battle to sell the deal to shareholders, told German lawmakers any state role had to be limited for the combined company – which would be the world’s largest aerospace and defense group – to be competitive.
“There are many examples to prove that companies in this sector and of this size should not necessarily be subject to state involvement,” Enders, a German, told reporters after briefing Parliament’s economy committee.
While pan-European group EADS and Britain’s BAE are keen to limit state interference, which might deter investors or other governments from placing orders, politicians fear the combined group might be vulnerable to a takeover and jobs might be lost. EADS has 50,000 employees at 29 sites in Germany and 133,000 worldwide. Nicknamed “Major Tom” in Germany, Enders is a former paratrooper with an uncompromising reputation who has clashed with German and French governments before. He will need all of his political acumen to convince Germany and France that the deal’s merits outweigh the drawbacks. He told lawmakers he was ready to discuss with the German government any reservations it had over the planned deal, which would create a business with $93bn of sales from Airbus jetliners to Typhoon warplanes and nuclear-powered submarines. Deputy Economy Minister Hans-Joachim Otto, who attended the committee hearing, told reporters it was still an open question as to whether the deal would go ahead and said Germany had to protect national security and jobs. (Source: Reuters)
26 Sep 12. BAE Systems (BA.TO) needs its proposed merger with Airbus parent EADS (EAD.PA) to succeed if it is to avoid being cast adrift as a company without a clear strategy in a shrinking industry or a takeover target for predatory U.S. rivals. If the planned $45bn merger between the British defense group and the European aerospace giant does not go ahead, BAE could look to do a deal with a U.S. group, sell off its standalone U.S. business or remain alone trying to squeeze growth from the contracting global defense sector. Europe’s biggest defense deal in a decade faces many hurdles, including a row over the proposed 60/40 EADS-BAE ratio, how to ringfence top-secret projects and how to satisfy governments keen to safeguard EADS operations in France and Germany. Such plans could, however, be scuppered because of the U.S. government’s reluctance to see more consolidation among their prime contractors and competition reduced. Some analysts believe this attitude could change given that BAE is one of the biggest foreign suppliers of weapons to the Pentagon. If the merger falls foul of the many political and regulatory obstacles in its way, BAE will be left stranded and Ian King, its chief executive of four years, will face tough questions about his vision for the company, both past and present. In its most recent annual report BAE Chairman Dick Olver said the group’s main strategic aims included developing its export business, building on its large geographic footprint and pushing growth at its cyber security arm. BAE is precluded from making statements that relate to the proposed EADS merger because of UK takeover panel rules. In 2006, BAE sold its remaining 20 percent stake in Airbus for $3.5bn to fund its big move into the then booming U.S. defense industry. It had created a standalone U.S. business, BAE Inc, a year earlier which has since become one of the largest suppliers of weapons to the United States. BAE Inc has grown through acquisitions and now competes toe-to-toe with prime U.S. contractors such as Lockheed, Northrop Grumman (NOC) and Boeing (BA). It reported revenues of $14.4bn last year – around half of BAE total group sales. BAE Inc, however, expects U.S. defense spendi