It has not taken long since the collapse of the proposed merger with Franco-German company EADS for the BAE board to be put under pressure.
The EADS and BAE mega merger is not going to go ahead, at least for now.
Talks between the two major defence companies continued into the night as they look to strike a deal.
A BAE Systems source said the proposed merger was seen as an "opportunity" rather than an "absolute necessity" for the company.
The company has won a number of contracts this year, including:
- £149 million for Typhoon and Tornado support to the RAF
- £446 million for Typhoon support across other countries including Germany, Italy and Spain
- £116 million for production of aircraft fuselage assemblies
- £328 million for the design and development of the replacement Vanguard Class submarine
- £1.6 billion to supply aircrew training to the Royal Saudi Air Force
Jim Moohan, GMB union official in Scotland has welcomed the collapse of merger talks between BAE Systems and EADS, saying the workforce will be relieved. He said:
This is a decision of fine judgment and the BAE Systems workforce will be relieved that the management did not rush into a situation that could have destabilised a very successful company.
There were too many 'ifs' or 'buts' and grey areas which, if the merger had gone ahead, were causing serious concern. GMB now hopes that BAE Systems will focus on what they do very successfully and the company must look to world markets for opportunities that will provide employment for their highly skilled workforce across the UK.
The Government said that it was clear the proposed BAE EADS merger had commercial logic, but insisted the merger would only be successful if the interests of all parties were met. A Government spokesman said:
The two companies will remain as successful independent companies, each with a significant presence in the UK. The Government has always been clear that it could see the commercial logic of this deal but that it would only ever work if it met the interests of all the parties involved. Today the two companies decided that a merger cannot be concluded on this basis.
Reuters is quoting the Department of Business, Innovation and Skills as saying BAE and EADS will remain as successful independent companies with significant UK presence.
Defence Secretary Philip Hammond spoke to his adviser outside the Conservative Party Conference moments after it was announced that the BAE-EADS merger deal had collapsed.
Mr Hammond had been inside watching David Cameron's conference speech.
Tom Enders, Chief Executive of EADS, said it was "of course, a pity" the merger did not succeed:
I'd like to thank everybody who supported us, in particular all the colleagues at BAE Systems and EADS for all their hard work and dedication to this project in recent months.[...] It is, of course, a pity we didn't succeed but I'm glad we tried.
I'm sure there will be other challenges we'll tackle together in the future.
Ian King, Chief Executive of BAE Systems, said he was "obviously disappointed" but insisted the business remained robust. He said:
We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders.
We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world class and complementary businesses to create a world leading aerospace, defence and security group.
However, our business remains strong and financially robust....We remain committed to delivering total shareholder value and look to the future with confidence.
BAE Systems and EADS released a joint statement announcing the formal termination of their merger talks and blaming the government stakeholders for the collapse. They said:
Notwithstanding a great deal of constructive and professional engagement with the respective governments over recent weeks, it has become clear that the interests of the parties' government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger.
BAE Systems and EADS have therefore decided it is in the best interests of their companies and shareholders to terminate the discussions and to continue to focus on delivering their respective strategies.
The companies confirm the merger deal is off.
But fascinatingly, they very squarely put the blame on politicians.
Unite the union has called for the government to strengthen its 'golden share' in BAE systems to save British jobs, following the reported collapse of merger talks between BAE Systems and EADS.
Ian Waddell, Unite national officer for aerospace and shipbuilding said:
The highly skilled workforces of both companies are the beating heart of British manufacturing. A merger, with a jobs guarantee, would have created a strong new company that could have protected the UK’s long term interests.
There was an industrial logic to the merger, but national and political interests proved to be the stumbling block. The UK government now needs to strengthen its ‘golden share’ and send a powerful message that it backs British manufacturing and BAE Systems.