- BAE Systems would have 40% stake, EADS a 60% stake
- Organizations already partner in several projects
- Merger would help EADS in U.S.
British arms manufacturer BAE Systems (IW 1000/158) and European aerospace firm EADS revealed Wednesday they are in merger talks to create a global aerospace and defense leader that would better rival U.S. giant Boeing (IW 500/16).
"BAE Systems plc and EADS confirm that they are in discussions regarding a possible combination of their businesses," the companies said in a joint statement that confirmed feverish market speculation.
The talks envisaged BAE Systems owning 40% of the enlarged group, with EADS holding a majority 60% stake.
"The potential combination would create a world class international aerospace, defense and security group with substantial centers of manufacturing and technology excellence in France, Germany, Spain, the UK and the U.S.A.," it added.
The new group would manufacture products ranging from Airbus passenger jets and military transporters to Challenger tanks, Tornado jet fighters and aircraft carriers.
The merged company would have a unified board and management structure with identical boards and executive committees at each of BAE and EADS.
"This potential combination would be implemented through the creation of a dual-listed company structure, under which both companies would operate as one group by means of equalization and other agreements but would be separately listed on their existing exchanges," the statement added.
A History of Collaboration
The two groups have a history of collaborating. They are already partners in joint ventures including the Eurofighter project and MBDA missile systems.
BAE is an expert in the field of defense, security and military, whereas most of EADS's work is in the commercial sector with its Airbus jet division.
A merger would help EADS make headway in the United States, which until now it has struggled to do, Guy Anderson, senior principal analyst at IHS Jane's Defense Industry said.
"BAE Systems now is far bigger in the U.S. than it is in Europe," he pointed out.
