30 Sep 12. Hollande warms to BAE-EADS tie-up. After weeks in which it had carefully kept its counsel on the proposed EADS-BAE deal, France’s Socialist government has finally begun to show its hand. What has become clear is that François Hollande, who ousted Nicolas Sarkozy from the presidency in May, is keen to see the deal go ahead – though subject, of course, to some traditional French conditions about continued state influence over the company. Such conditions could well still throw a spanner in the works. Unlike David Cameron, the British prime minister, Mr Hollande has not yet expressed support for the deal in public. But French officials stress that they believe the tie-up fits well with the “Vision 2020” strategy outlined by Louis Gallois, the former EADS chief executive, and approved by France as a major shareholder.
One senior official said the deal “ticks all the boxes” of the ambition for EADS, set out in the Gallois vision, to become equally balanced between commercial aerospace (its business is currently dominated by Airbus) and defence operations. (Source: FT.com)
04 Oct 12. To win approval for their planned $45bn merger, EADS and BAE systems must persuade Washington to let a pan-European behemoth control some of the most sensitive U.S. defense contracts, without triggering a political backlash. Defense industry experts say it should not be difficult for Washington to protect its security interests in allowing the deal to go ahead, but the politics could become complicated if Boeing and other competitors lobby against the deal.
“The security issue can be dealt with if the deal is structured properly,” said Loren Thompson, chief operating officer of the Virginia-based Lexington Institute think tank. “The only way this deal can be blocked in the U.S. is if opponents demagogue the issues of security.”
The merger must first be cleared by European officials, and the companies and shareholders must agree terms, but U.S. approval would eventually be necessary as well. BAE is British in origin, but increasingly it has become a trans-Atlantic firm, easily the biggest foreign company in the U.S. defense sector. The U.S. military is its biggest customer and accounts for nearly half of its global revenue. Its U.S. defense operations are precisely what would make it such an attractive partner for EADS, the Franco-German maker of Airbus civilian jetliners. Under a complicated Special Security Arrangement (SSA) with the U.S. government,
BAE’s U.S. defense businesses are kept under separate management and run by Americans, allowing it to bid for and work on contracts involving top secret technology. Theoretically, there is little reason why those safeguards could not remain in place after a merger with EADS. But politically, it may be one thing for Washington to allow defense deals with a private sector contractor from Britain – its main battlefield ally in Iraq and Afghanistan – and another thing entirely for it to cooperate so closely with a European giant, partially controlled by the French state. (Source: Reuters)
04 Oct 12. BAE tie-up bad for UK, warns Darling. Alistair Darling has made a forceful intervention in the plans by EADS to combine with BAE Systems, saying British interests were bound to suffer because the UK government would have no equity stake in the enlarged group. The former chancellor of the exchequer told the Financial Times he saw the logic for a new European civil aerospace and defence giant to compete with Boeing of the US. But he said it was “totally unacceptable” that the French and German governments were pushing to have equity stakes while Britain would not.
“We will be taken to the cleaners,” said Mr Darling, who was also business secretary when the Labour party was in power. “I don’t see how you could have a large new company like this with the French and German governments having large direct and indirect stakes and we have none.
“I would prefer that all three governments had minimal