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BAE merger deal called off

Major defence firms BAE and EADS are blaming politicians for the collapse of their £25bn merger deal.

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Minister denies 'discord' between governments scuppered deal

A minister denied today that "discord" between the UK, France and Germany was behind the collapse of a £28 billion merger of defence company BAE Systems and rival EADS.

Business minister Lord Marland insisted the Government had "very positive" relationships with France and Germany and that had not influenced the outcome.

The two companies will remain as independent companies each with a significant presence in the UK. The Government was clear that the merger would only ever work if it met the interests of all the parties involved.

– Lord Marland

Why the BAE and EADS merger was touted

  • With 220,000 staff worldwide - including 52,000 in the UK - and combined sales of £60 billion a merger would have created a new market leader bigger than Boeing in size.
  • The merger would have combined BAE's defence expertise - including lucrative UK and US contracts - with Airbus parent EADS's leading position in the commercial aircraft and aerospace sector.
  • Unions also supported the deal believing it would have created a stronger company to guarantee long term jobs.
  • There were also hopes the merger would mean Airbus UK - which supports 140,000 British jobs - would remain on these shores.

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Labour: 'Fresh plan' needed after BAE deal collapse

Shadow Defence Secretary Jim Murphy has urged government ministers to "urgently convene" talks to "develop a fresh defence industrial plan" after the proposed BAE-EADS merger was called off.

Mr Murphy said:

Now that the answer to the future of UK defence manufacturing cannot be found in France and Germany, it must lie in Britain and other established markets.

Those Conservative MPs who were warning against the involvement of French and German governments must now demand a more active industrial strategy from the British government.

BAE explains 'disappointing outcome' to staff

BAE has sent a notice to all its 93,500 employees explaining the "disappointing outcome" of its merger talks with EADS.

The letter, written by CEO Ian King, states:

Over the past few weeks, we have been in discussion with EADS about a potential combination of our companies. We have now decided to end these discussions.

From the start of these talks, I was clear that we would only proceed with a merger of our businesses if a structure could be created that aligned the interests of our stakeholders and received their strong support. I did not underestimate the challenges in achieving this but felt that given the additional value this strategic opportunity would create for our shareholders, it was worth exploring.

Notwithstanding a great deal of constructive discussion with governments, it became clear that the interests of our stakeholders could not be adequately aligned with each other or with the objectives that we had established for the merger. I therefore decided it is in the best interests of BAE Systems and our shareholders to terminate the discussions.

This is a disappointing outcome as there is no doubt in my mind that the merger represented an opportunity to bring together two strong and successful companies into a group that would be greater than the sum of its parts. BAE Systems is a strong, independent and financially robust company that is successfully implementing its strategy.

We remain committed to developing our position as a world-class engineering company with a significant international footprint and growing our platform and services positions, together with our cyber, intelligence and security and electronic systems businesses.

Mr King also highlighted that BAE would "remain close partners with EADS" and thanked BAE's employees for their "support, determination and hard work".

BAE: Merger was 'opportunity, not necessity'

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
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