European aerospace moves

The news pages of this weeks Flight magazine include details of what may prove to be a disturbing move in the European aerospace industry. This story covers moves by EADS (France) and its attempt to merge with Thales.

According to the report Thales prides itself on its 'multi domestic' markets, having large interests in the UK and USA and also being one of the few European defence contractors with real influence in the Pentagon, all of which would be a major prize for EADS and would allow them to take on such as BAE on more or less equal terms in these markets.

There is however another aspect to this which might cause a rift much closer to home, this merger would greatly expand the French half of EADS and reduce Germany to the status of a junior partner, when EADS was created France and Germany were equals in the venture.

The dilemma for Germany is that the merger would result in a bigger, stronger and more influential EADS overall, but Germany's role within it would be diminished.

This is the first I've heard of this so if anyone else has more on it please post it here.

That is not all, BAE is selling its share on Airbus to EADS, in order ton concentrate on defence projects particularly in the US, rumours of acquisitions have emerge although is difficult to name a candidate at this point.*

The factories set up in Britain are very likely to remain there but the British influence on Airbus will be gone. It seems that with every day EADS and therefore Airbus is becoming an European company.

* It seems they are talking with Boeing, and I don't think its about buying the big B
news.independent.co.uk...

[edit on 7-4-2006 by carcharodon]

As I said in the other thread, BAe is on an aggressive recruitment drive in the aerospace/defence field - and not just for processing existing orders (i.e. Saudi EF2000s), aerodynamicists etc would be needed for R&D work, not manufacturing.



BAe may have several new concepts on the go, and they need big investments to fufil the promise they see... maybe...

today.reuters.com...

You are right, Waynos, the French will get more controle over EADS, which can't be good for the international relations between the participating countries.

[edit on 4-8-2006 by Zion Mainframe]

[edit on 4-8-2006 by Zion Mainframe]

I notice that there is also a lot of speculation over a BAE-Boeing merger. I can't get my head around this, would it be a proper 50/50 merger or a takeover by one of the parties? BAE has already bought out chunks of Boeing over the last couple of years, I cannot believe it is going for the rest of it

Would that make mixed fighter forces more likely where the RAF flies BAE Raptors and the USAF flies Boeing Typhoons

My head hurts

Originally posted by waynos
I notice that there is also a lot of speculation over a BAE-Boeing merger. I can't get my head around this, would it be a proper 50/50 merger or a takeover by one of the parties? BAE has already bought out chunks of Boeing over the last couple of years, I cannot believe it is going for the rest of it

Would that make mixed fighter forces more likely where the RAF flies BAE Raptors and the USAF flies Boeing Typhoons

My head hurts

Merger of equals? I don' think so. BAE will let itself be bought by Boeing, make no mistake Boeing will remain an American company with perhaps a rather small British partner/stockholder.
Just like everything else these days. Britain in the US junior partner, never their equal.

Northrop and Raytheon would be candidates for a 50/50 merger (Northrop more so than Raytheon imo given BAE's involvement in MBDA), Boeing is just a little too big. Whether the US government would be happy letting this happen is debatable, I'd say they wouldn't.

I just read Boeings name mentioned so I wasn't thinking about other candidates, that is true about Boeing being far too big for BAE to try and swallow, thats why it didn't make sense, but Northrop Grumman - BAE? Interesting idea.

I'm not sure how the US Govt would react to be honest as BAE is already one of their bigger suppliers and recently proved more reliable, security wise, than most US domestic defence contractors. BAE Inc already has greater security and technology clearance than its own parent company in the UK so it may just be a continuance of this. Cutting ties with EADS by selling off Airbus may also be linked to BAE's trustworthiness with the Americans, especially with regard to the F-35?

[edit on 8-4-2006 by waynos]

BAE eyes US as Europe's arms sector splinters

LONDON (Reuters) - British defense firm BAE Systems could be set for its boldest U.S. takeover yet, leaving behind a Europe where rival EADS this week was rebuffed by its most likely takeover target, Thales of France.

BAE, Europe's biggest defense player, has shown skepticism about European mergers and on Friday went a step further, saying it wanted to sell its stake in France-based civil airliner maker Airbus. "The biggest question is what BAE buys with its Airbus proceeds," said one London-based aerospace analyst. BAE could pocket $5 billion or more by selling the stake to rival EADS, boosting its war chest for more U.S. takeovers while squeezing that of EADS, whose defense business could use some acquisitions of its own.

EADS put on a brave face, unfazed by the prospect of buying BAE's 20-percent share of Airbus, in which it holds the other 80 percent. "We are not surprised. We are just surprised by the timing," an EADS spokesman said. It was the second time this week that a European rival had turned its back on the Franco-German-Spanish company. On Wednesday, Thales rebuffed calls from EADS to forge a partnership in satellites, sealing a deal instead with French telecoms firm Alcatel. Analysts said the deal hurt chances of EADS taking over Thales in the short term, a move vital for EADS to grow in Europe to counter BAE's U.S.-powered expansion. "The biggest thing that happened this week is that EADS and
Thales didn't merge," said the London-based analyst.

Thales Chief Executive Denis Ranque said the Alcatel deal was not intended to be hostile to EADS, but analysts drew just the opposite conclusion. They saw it as defensive not only for Thales but for the French defense industry. Thales emerged bigger, to better battle Italy's similarly sized Finmeccanica, while Alcatel's increased stake in Thales means it can block EADS from grabbing France's biggest defense player. The national sensitivities mirrored those seen in December, when a Thales bid for German sonar equipment maker Atlas Elektronik was passed over for one from EADS and German steelmaker ThyssenKrupp

AMERICAN TARGETS

"Disposal of Airbus is very much in line with BAE's stated strategy to sell European assets and focus on the more highly rated U.S. defense sector," said Numis Securities analyst Andrew Gollan in a research note.

BAE on Friday denied media speculation about a pending bid for U.S. defense firm L-3 Communications Holdings Inc., yet analysts said there were other possibilities. There have been rumors of BAE buying a large U.S. defense contractor for some years, said Paul Nisbet at JSA Research, which specializes in aerospace stocks. "It would seem that things are wide open. The most available at this point, if they are really going for something big, would be General Dynamics or Raytheon." General Dynamics Corp. is the second-largest supplier to the U.S. Army, making Abrams tanks and Stryker fighting vehicles. It is the Pentagon's fourth-largest supplier overall, building warships and submarines and providing military intelligence systems. It has a market value of about $26 billion. Raytheon Co. makes Tomahawk missiles, Hawker jets and a range of military electronics and is the Pentagon's fifth-largest contractor, with a market value of about $20 billion.BAE's last major move was its purchase of U.S. Bradley fighting vehicle maker United Defense for $4.2 billion in a deal that closed last year.

Full Article >>

Well such a merger would make them the worlds biggest defence supplier by a margin of about $10bn, it’d probably be the single biggest supplier of defence equipment to the US government as well. I’m not sure that the US would be comfortable with such a big single entity with very strong ties to another nation (even the UK) being in that kind of position.

I don't think BAE would buy Boeing, it does seems abit to large for them:

BAE reported operating revenus of 26 Billion and reported an operating loss of 899 million according to AWST's 2006 Source Book Page 305

Boeing reported revenuse of 52.5 Billion in the same period with a profit of 1.8 billion

Eads in the same period had 43 billion and 1.4 billion respectivly

Thales showed 14 billion and 270 million respectivly.

On paper putting aside political issues it seems unlikely that BAE would be able to buy out Boeing and EADS would seems like a better candidate. However, Boeing and EADS could buy out / merge BAE.

Id be surprised if it happens however and here is why:

The US government will not allow Boeing to be bought out. The same goes with France which is 200% more protective of its core businesses and lets face it EADS is pretty much under the French thumb.

Is the UK willing to pretty much cede the defence role to other countries? Id be surprised if they were willing to do so, and if they were would they allow the French to control things? If the government allows it at all it is far more likely that they would go with Boeing. It also may allow them to sidestem some of the tech transpher issues that have plagued systems in the past.

A Boeing / BAE combo would also have other issues as well. What about MBDA? Would that combined entity continue? Id love to the the Storm Shadow in the US Inventory and would provide a nice buffer between the CALCM and AGM-129 ACM.

More evidence in the Boeing / BAE marraige: Why would it divest itself of its profitable AIRBUS stake? Can you imagine the screams from Cruela deVillipen if Boeing has a stake in Airbus