Oct 12. German Defence Minister Thomas de Maiziere has warned about the threat of growing concentration in the defense industry following the collapse this week of a planned merger between European defence and aerospace giants BAE and EADS.
“If a defense firm is too small it has trouble keeping up with technological advances,” de Maiziere told dpa journalists at a briefing on Thursday. “But when a company is too big, monopoly structures can result and put pressure on the armed forces and ultimately the taxpayer”, he said.
Given the budgetary constraints of the German army, exports from German defence companies will continue to grow in significance, de Maiziere said. This is despite the minister predicting that the German industry would be unable to look forward to continuing high rates of business growth on the big European and US markets. However, de Maiziere rejected a change in Germany‘s restrictive arms export guidelines. Critics have pointed to German opposition to the corporate marriage between British-based BAE and the Franco-German EADS as one of the key reasons for the failure of the merger. But in his comments, de Maiziere warned against unilaterally blaming one party for the collapse of the merger. Apart from members of Europe‘s political establishment, he said many of the two companies‘ non-government shareholders had been critical of the deal. (Source: Google)
12 Oct 12. The European Union must improve political coordination around the aerospace industry to avoid events like Wednesday’s collapse of the merger between defense groups BAE Systems (BA.TO) and EADS (EAD.PA), the president of the sector’s European association said on Friday. Jean-Paul Herteman, chief executive of French aerospace group Safran (SAF.PA), said the sector has room for consolidation and its outlook remains robust.
“Last week has been frustrating, not to say more, but it’s one week in a longer process that we have to continue to assess,” Herteman told Reuters on the sidelines of the annual convention of the European aerospace and defense industry in Lisbon. “Beyond competition issues there are political stakes because we are talking about the security and sovereignty of countries. Obviously more political coordination is needed so this does not happen again,” he said.
Talks to create a $45bn aerospace and defense company with a merger between EADS and BAE broke down on Wednesday amid political disagreements over the deal.
“Nothing can happen in this field without support of governments, these actions have to be fully undertaken by all stakeholders,” he said.
The Safran CEO also responded to criticism from activist investor The Children’s Investment Fund Management(TCI) about what it called Safran’s “value destructive” acquisitions. Herteman said his company had a clear strategy focused on high-technology and its earnings record spoke for itself.
“We do have a strategy. We are the kind of people that we do what we say. We have a strategy of diversifying ourselves within a consistent business model, it is high-tech based on technology differentiation,” he said. “Since 2007 we have been increasing our operating profit by 20 to 25 percent a year and will continue to do so in the years to come. Profit and dividend have been growing and will continue to grow.” (Source: Reuters)
11 Oct 12. US attitude to contractor mergers unclear. The collapse of merger talks between EADS and the UK’s BAE Systems has left a significant question hanging not only unanswered but unasked: namely what would be the attitude of the US Department of Defense to mergers between its suppliers? Following the abandonment of EADS’s tie-up with BAE, the sixth-biggest US military contractor by annual revenues, US defence companies still do not know whether falling defence spending has made the Pentagon relax its opposition to further consolidation among its big suppliers. After the end of the cold war some US industrial companies – such as Chrysler, General Motors and