Scaling new heights with merger ambitions…BAE Systems in talks with EADS

Britain’s defence company BAE Systems is negotiating an ambitious £30.4 billion merger deal with its rival European Aeronautic Defence and Space Company (EADS), in a bid to create the world’s second biggest aerospace and defence company, after Boeing.

If the London-based aerospace giant BAE Systems is successful in its negotiations, the two companies are expected to have combined sales worth £60 billion, along with a workforce of 220,000 across the world. Additionally, the merged entity will be the main supplier to the European military needs, and will also build Britain’s nuclear submarines and own the world’s biggest plane manufacturer – Airbus.

Interestingly, the combined group will be the largest industrial employer in Britain with 60,000 employees. BAE Systems and EADS already have tie-ups through the MBDA missiles business and projects including the Eurofighter Typhoon jet.

According to the merger proposal, BAE shareholders would get 40% of the new company, with a 50:50 mix of board seats. Tom Enders, chief executive of EADS, and Ian King, head of BAE, are likely to continue in their positions. BAE said decisions regarding who would take the top job, or where the merged company’s headquarters would be, are yet to be made.

The merger will enable EADS to take advantage of BAE’s US market, where the government is its biggest customer. BAE, in turn, can distribute its earnings from its current defence projects to commercial aircraft and space satellites, in times when the Western defence market is crippling.

The merger negotiations news has taken the markets by surprise and sent BAE’s shares soaring by 10.6%, forcing the British company to make an announcement.

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