With rising shareholders concerns and governments’ increasing demands, BAE Systems’ £30 billion merger with the European aerospace giant EADS, seems infeasible at this point of time.
Standard Life Investments, which owns 0.84% of BAE Systems, has criticised BAE Systems’ lack of communication with its shareholders regarding its move to create the world’s second biggest aerospace giant.
David Cumming, the CEO of Standard Life, told Radio 4′s Today programme, “I think it is a difficult deal as you’ve got US concerns over defence technology leakage and you’ve got political issues — not just Germany and France but also the UK. There’s golden shares all over the place, so we’re relatively sceptical. Also, BAE has been shy in communicating the rationale for the deal to shareholders.”
The planned merger news which hit the market last week, would see BAE Systems own 40% of the new company while EADS would get a larger share of 60%. But the deal needs approval from a number of governments, including France and Germany, each of which owns 22.5% of EADS, while Spain holds 5.5% in the European giant.
The US government, a major BAE customer, has national security concerns, while Britain – which could block the deal with its golden share – also has worries over the security of its Trident nuclear submarine programme. It is understood BAE would make ring-fencing Trident a priority if the merger happens.
Meanwhile, Angela Merkel, the German Chancellor, said Berlin was “discussing and evaluating the EADS-BAE merger plans and we are in discussions with others on this”. Pierre Moscovici, France’s Finance Minister, said his government was “asking a lot of questions” with respect to the deal.