BAE Systems, EADS in talks over merger

LONDON - Agence France-Presse

This handout photo shows the BAE Systems’ stand at the Farnborough International Airshow held in July.

British arms maker BAE Systems and European aircraft manufacturer EADS are in talks over a possible merger that would create a global leader in aerospace, defense and security, the pair said on Sept. 12.

“Further to the recent movement in BAE Systems’ share price, BAE Systems plc and EADS confirm that they are in discussions regarding a possible combination of their businesses,” the companies said in a joint statement that confirmed market rumors.

The talks envisaged BAE Systems owning 40 percent of the enlarged group, with EADS holding a majority 60-percent stake, according to the statement.

“The potential combination would create a world class international aerospace, defense and security group with substantial centers of manufacturing and technology excellence in France, Germany, Spain, the UK and the USA,” it added.

Both groups have a long history of collaboration and are current partners in joint ventures including the Eurofighter project and the MBDA missile systems firm.

The new enlarged company would have a unified board and management structure with identical boards and executive committees at each of BAE Systems and EADS.

“This potential combination would be implemented through the creation of a dual listed company structure, under which both companies would operate as one group by means of equalization and other agreements but would be separately listed on their existing exchanges,” they added.

Under the proposals being discussed, the two groups would issue special golden shares in BAE Systems and EADS to each of the French, German and British governments.

This would replace Britain’s stake in BAE Systems and the stakeholder arrangement in EADS, the pair said.

 In addition, it has been agreed that EADS would pay 200m to its shareholders prior to completion of a possible transaction.