European Aeronautic Defence and Space Co. (EADSY.PK) Wednesday confirmed having talks for a possible merger with BAE Systems plc (BA.L, BAESY.PK) in a bid to create an industry giant that will surpass rival Boeing Co. (BA) in terms of sales.
The talks envisage a 60 percent ownership for EADS, with the remaining stake held by BAE Systems.
EADS, which owns commercial aircraft maker Airbus, said the possible merger is subject, among other things, to the approval of its Board, and that there can be no certainty the talks will fructify.
The potential combination will have a dual listed structure, under which both companies would operate as one group, while being listed on their respective exchanges.
It is also expected that there will be a unified board and management structure with identical boards and executive committees for both companies.
A possible merger will help EADS to tide over weakness impacting the civil aircraft sector by latching on to the defense sphere, where BAE Systems focuses. A merger will also resuscitate plans for a pan European aerospace business.
The potential combination will also catapult the two companies ahead of Boeing in terms of sales. On a combined basis, EADS and BAE Systems would have sales of about 72 billion euros ($93 billion), based on 2011 results. Boeing last year reported revenues of $68.7 billion.
Being close collaborators, the two companies will benefit from lower costs, access to technology, as well as manufacturing centers spread across France, Germany, the U.K. and the U.S. The two companies are partners in programs including Eurofighter and the missile systems venture MBDA.
Due to sensitive defense businesses in various countries, EADS said talks have been initiated with respective governments about the impact of a potential merger. EADS and BAE Systems envisage certain defense activities would be ring fenced with governance arrangements appropriate to their national security importance.
The two companies also envisage issuing special shares in BAE Systems and EADS to each of the French, German and U.K. governments to replace the existing U.K. government share in BAE Systems and the stakeholder concert party arrangements in EADS.
Should the transaction proceed, EADS would pay 200 million pounds to its shareholders prior to completion, to better align the two companies' dividend ratios. BAE Systems and EADS' normal dividend payments in respect of 2012 would be unaffected.
EADS was formed in 2000 by the merger of Aérospatiale-Matra, DaimlerChrysler Aerospace AG of Germany, or DASA, and Construcciones Aeronáuticas SA of Spain. BAE was formed in 1999 when British Aerospace Plc, which had been exploring a merger with DASA, instead chose an all-U.K. combination.
In Paris, shares of EADS closed Thursday at 28.00 euros, down 5.63%, on a volume of 6.0 million shares.
In London, shares of BAE Systems closed at 363.60 pence, up 10.62%, on a volume of 47.0 million shares.
 | | To receive FREE breaking news email alerts for European Aeronautic Defence and Space Company EADS NV and others in your portfolio |
|
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Business News