EADS and BAE: Tom Enders vows swift decision on merger

EADS chief executive Tom Enders: "Both companies are convinced that this is the right thing to do"

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The chief executive of EADS has called a proposed $45bn (£28bn) merger with the UK's BAE Systems a "great opportunity" and vowed a swift decision on the merger.

A deal faced a setback on Monday when Lagardere, a key EADS shareholder, expressed reservations.

Political support for the deal is also required from the UK, France and Germany.

EADS chief Tom Enders said: "We intend to come to a conclusion very soon."

In comments to an audience at the Royal Academy of Engineering in London, Mr Enders added: "We cannot go on much longer."

He also the two firms together could "achieve a stronger platform for growth internationally".

Under the code of the UK's Takeover Panel, the two parties must announce a decision on the outcome of their talks by 17:00 BST on 10 October.

However, this deadline is widely expected to be extended at the request of the parties involved.

Golden share

On Monday, the Reuters news agency cited an anonymous Ministry of Defence source as saying that the UK government would veto the deal if it deemed it not good for the country.

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BAE and EADS see themselves as trying to forge the equivalent of our victorious golfing squad. ”

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The government owns a golden share in BAE that allows it to block any change in control of the UK-listed company.

The future of EADS, which owns the European aircraft manufacturer Airbus, is highly sensitive in France and Germany, because it is a major defence contractor and a major employer in both countries.

EADS would comprise 60% of the planned new company, which would have £60bn in sales and 220,000 employees worldwide, including 50,000 in the UK.

'Strategic potential'

Earlier, Mr Enders and BAE boss Ian King issued a joint appeal for support.

"Despite the industrial and strategic potential attributed to it, this plan has not yet demonstrated that it was creating value for EADS," a spokesman for the French media group said, as it called for a review of the deal.

Lagardere owns 7.5% of EADS, but has an agreement dating back to EADS' foundation in 2000 to represent the French government in their collective 22% share.

The French shareholder's comments rebutted the two chief executives' claim that the merger would create a company "greater than the sum of its parts", said the chief executives.

The UK parliament's defence committee has already launched its own review of the deal, including its impact on UK defence policy and national security, and on the company's relations with the US Pentagon, one of its biggest clients.

Despite EADS' much greater revenues, the two firms have turned in roughly equal profits of about £1.2bn ($2bn) over the 12 months to June this year.

Eurofighter Typhoon outside a BAE Systems hangar

The markets also appear to have taken the view that the deal is much better for the UK's BAE than for the Franco-German EADS.

EADS shares have fallen 17% since news of the merger negotiations first leaked on 12 September, while BAE shares have held steady.

Deadline

The two companies' bosses argue the combined business will be more resilient, and better able to take advantage of opportunities for growth.

BAE Systems is a major defence contractor in Europe and the US, while EADS owns Airbus, the European rival to America's Boeing.

The two bosses want to replace the current arrangements which give effective joint control to three shareholders - Lagardere, the French state, and German industrial group Daimler, which owns 22.5% of the company.

Instead, they say, the new group should be allowed to operate in a normal commercial manner, with all shareholders having the same rights.

However, that may cause friction with Paris and Berlin, with reports suggesting both governments are keen to preserve their influence within the new company.

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