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BAE merger on the cards?

SPECULATION that Farnborough-based BAE Systems will no longer remain an independent company is rife after comments from its chief executive.

In a comment to a City aerospace analyst, Mike Turner said a merger with another company did not have to be on a "50-50" basis, meaning tying up with a similar sized company was not the only option.

His views prompted speculation that the company could be about to do a deal with one of the giant US aerospace companies, including Boeing or Lockheed Martin.

Commenting on the speculation, BAE spokesman, Richard Culthard said: "Clearly something's going to happen though precisely what's going to happen next, we're not sure."

Mr Culthard's comments are in marked contrast to responses to previous questions about merger speculation, which have usually met with denials that anything was on the cards.

But he insisted there was no reason for Farnborough to be worried.

"It's not bad news for Farnborough," he said. "It's part of the global restructuring of the industry which has been going on for a few years and continues."

Development and purchasing for defence equipment has become an increasingly international business.

BAE Systems is currently working on the vertical take-off Joint Strike Fighter with America's Lockheed Martin, the Eurofighter with Germany, Spain and Italy and the Royal Navy's two new aircraft carriers with French defence group Thales.

Mr Culthard also welcomed the speculation for boosting the company's share price pointing to its rise from 124p last week to 158p on Monday.

It was reported in national newspapers this week that BAE Systems had rejected a merger from Thales that would have created a European defence giant in favour of a US deal.

BAE sees merger with a US company as key to gaining greater access to the massive defence market.

By comparison, western Europe's defence spending is dwarfed by that of the United States, with Washington's arms budget accounting for half the entire world's defence purchasing.

However, the development of both the civil and defence aerospace industry over the past ten years could make for interesting times ahead for BAE.

For example, potential suitor Boeing is the arch rival of Europe's Airbus, in which BAE has a 20% stake.

If the British company teamed up with the Jumbo jet maker it could be forced to sell its Airbus share.

Lockheed, another possible partner, is thought to be a better fit.

It would pose fewer obstacles than Boeing with regard to Airbus and BAE is already working with it on the Joint Strike Aircraft, the Harrier replacement, which is the largest defence procurement programme in history.


Charlotte Neal
Chief Reporter (Aldershot)
Joshua Smith
Farnborough Reporter
Jon Couch
Sport Editor
Stephen Lloyd
Fleet & Yateley Reporter
Ros Collins
Junior News & Mail
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