BAE,EADS deal may trigger consolidation

In the biggest shake-up in Europe’s aerospace and defense sector in more than a decade,Britain’s BAE Systems and Airbus-owner EADS said they are in advanced talks

Written by Reuters | Washington | Published:September 14, 2012 12:37 am

In the biggest shake-up in Europe’s aerospace and defense sector in more than a decade,Britain’s BAE Systems and Airbus-owner EADS said they are in advanced talks to create an industry giant that would overtake rival Boeing in sales and contend with defence cutbacks in Europe and the United States.

The proposed deal,the biggest since a 2000 pan-European merger created EADS under joint French and German control,could kick-start a wave of consolidation in the sector,as companies vie for shrinking defence budgets.

Linda Hudson,chief executive of the US arm of BAE Systems,said the deal made sense given the downturn in US and European defense spending,but would also insulate the combined company against the inevitable cycles of the aerospace sector. “It’s a win-win proposition for both companies in this environment,” Hudson said.

Boeing CEO Jim McNerney said the Chicago-based aerospace leader was not threatened by such a merger,which he predicted would mark the start of global consolidation in the industry.

“I don’t see this as something that is going to threaten us fundamentally,” McNerney told Reuters.

While the complex deal faces obstacles,US government officials were not likely to block it,according to multiple sources close to the matter said.

DECODING THE MERGER

* The merger could create an industry giant that would overtake rival Boeing in sales

* The deal is the biggest since a 2000 pan-European merger created EADS under joint French,German control

* It would also simplify a complicated and politically fraught ownership structure for EADS

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