Partner Article

Merger between BAE Systems and EADS collapses

The long debated merger between BAE Systems and EADS has been cancelled after the governments involved failed to come to a decision. The £28bn deal was terminated after a diplomatic deadlock between the UK, French and German administrations. The German chancellor, Angela Merkel, is thought the be a key figure in the deal’s obstruction.

BAE Systems and EADS said they thought the merger was “based on industrial logic”, in a joint statement released on Wednesday.Conditions of the deal included three key “red lines” put down by the two companies and the British Government. France and Germany would be prevented from owning more than 9% of the business, and the two countries could not pool their shareholdings. Further to this, a national security board, which was planned to safeguard the security of each country that contained a large BAE-EADS operation, would not head up the joined companies.

In a statement from the two defence firms, BAE Systems and EADS said: “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. 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.”

Ian King, the Chief Executive of BAE Systems, said: “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. However, our business remains strong and financially robust. We continue to see opportunities across our platforms and services offerings and in the various international markets in which we operate.”

British national interests are also being blamed for the failure of the transaction, as a partnership with a Franco-German company could impact security. The U.S is the biggest customer of the British-owned BAE Systems, and conditions of the deal could not be agreed between the European countries to satisfy UK concerns over its relationship with America.

Chief executive of EADS, Tom Enders, who urged politicians to stay out of the deal during merger discussions, 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. EADS will continue on its international growth path and our shareholders can continue to expect profitable growth, excellent liquidity and programme execution based on a strong order book…I’d like to thank everybody who supported us, in particular all the colleagues at BAE Systems and EADS for all their hard work and dedication to this project in recent months. A special thank-you goes to Ian King for his trust and partnership.”

This was posted in Bdaily's Members' News section by Miranda Dobson .