BAES v EADS Merger?

[Roland Pulfrew]

Just heard that BAES and EADS are in talks about merging with a 40:60% split respectively.

Is this so that the enlarged company can rip off European governments defence budgets more effectively? :E

[Bannock]

BAES has stabbed this country in the back. Its about time the Cheese eating surrender monkeys and Goose stepping sausage gobblers had a taiste of British Steel.
Except British steel went tits up, but you know what I mean.
Get in there BAES, take them to the cleaners!!:E

[Lima Juliet]

Hopefully the end of Mantis, Taranis and the idotic HERTi...roll on NeuroN and Talarion :ok:

[Lima Juliet]

PS - what do we reckon they'll rebrand as? BEADS or European Waste O'space? :ok:

[Rosevidney1]

I feel very uneasy about this proposal. I'm sure many will feel the same. I feel nostalgic for the days when we had a proper aircraft industry and many talented companies. Now we have a monopoly that is joining up with (or being subsumed into) an even larger one.

[Willard Whyte]

Q. what do we reckon they'll rebrand as?

A. DEBASES

[iRaven]

Q. What will it be rebranded as?

Well an anagram of EADS and BAESYSTEMS is..."Bad Yeast Messes"

Reminds me of a nasty case of scrum pox I had as a youngster! :E

@Rosevidney - that aircraft industry died years ago and all we're left with are the daft shisters that reside near Blackpool :{. If this comes off, good riddance to bad rubbish, IMHO of course

[Roadster280]

Good heavens!

How will some of the posters here mock t'Baron?

"Bei Hölle, sehen thi'".

"Ich muss nach Hause fahren, oder mein Whippet das Dreistückbonbon essen wird"

[Easy Street]

If true, good riddance to one part of the moribund "sovereign defence industry". Perhaps this might make it a bit easier to choose value, rather than votes, when making procurement decisions...

[Melchett01]

Before we even get to competition issues, I think ORAC has highlighted a very valid and very realisitic hurdle that must be overcome - especially given BAE Systems' large presence and reliance on the US markets - how much of a hinderance will ITAR be here?

But even assuming the various security regulations are circumvented, a very cursory quick look suggests that BAE and EADS coming together would have significant influence in a number of platforms, including but not limited to Typhoon, Rafale, Mirage 2000, Eurocopter, ATR and Airbus Military. I can see the competition lawyers rubbing their hands in glee already.

Plus from a financial perspective, what is the rationale here? It will allow BAE to diversify away from a purely military perspective, moving into the civil and space arenas (oh good, something else for them to cock up) whilst giving EADS access to the US markets. I might be wrong, but the enhanced synergistic effects of a merger were the primary reasons touted for Glencore and Xastra's coming together; that very quickly moved from being a synergistic coming together of partners to a potential hostile takeover. I can see a similar thing happening here, and the British government keen to put a dent in the deficit giving serious consideration to anything that will help out with the balance sheet. This will be nothign other than a long drawn out process that will deliver nothing but profits for the lawyers and longer term, put BAE at risk of being subject to a hostile takeover by the French and German govt dominated EADS.

[Rigga]

iRaven,
Your innocence of the job market is showing.
In none of these mergers does any rubbish dissappear - it just changes ID cards, logo's, badges.
The best you can hope for is that something fresh will come along and you won't notice how rubbish it is for some time.

[The B Word]

Melchy

BAES get "rodded" with ITAR already. Don't forget that less than 20% of their workforce are British or work in Britain - don't be fooled by the "B" in their company title. There are lots of divisions within the company that cannot talk to other divisions within the same company because of ITAR! So I would not see ITAR as making anything worse should they merge with EADS.

Yes, there are some programs on the table that are very similar and so it would be wise to think that EADS/BAES programs would be rationalised. However, go-it-alone programs for BAES are finished - Harrier GR(done), Sea Harrier (done), Tornado F3 (done), Nimrod (done) and Hawk (almost done). Typhoon, Tornado and F35 don't need Warton as we can get them and support from one of the other collaberative partners (ie. EADS or LM). So with nothing likely on the books, UK MoD skint (thanks to raping of funds and supply of inferior equipment by the very same company) and a global cash crisis, I am not surprised at all. I see this as the only way that the aircraft manufacturing arm of BAES can survive - it looks to me the final death throws of a once great industry, let down by greed, poor politics, underperformance in delivery and poor contract writing (the latter by the MoD).

As some have said already, if this is the end then good riddance. Let's throw investment at our automotive industry that seems to be doing very well and giving great global export sales (Jaguar, LandRover, Mini, Triumph Motorcycles, Lotus...to name a few). Who knows, many of the UK's automotive names died, or nearly died, in the 70s and then bounced back with investment - wouldn't it be great to see Vickers, Avro, DeHavilland, Hawker, etc... bounce back in the future, like Supermarine has done with the Mk 26 Spitfire with an Australian entrepreneur? How about a restart of one of the famous names to build a Grob Tutor replacement, that could also be sold in the GA market as a British success like our new motorbikes and cars?

The B Word

[Corporal Clott]

http://www.genny.force9.co.uk/images/cartoonimgs/26big.jpg

Good riddance, hopefully...

[Mandator]

Hi Mr B Word: How can you associate the Supermarine Spitfire with that terrible Mk 26 Spitfire? They are not comparable.

As for how to replace the "Little White Grub"? Put the Chipmunk back into production. The design data has already been extracted from the clutches of BAES and with investment in new jigging and tooling, and a modern engine, off we jolly well go.

Simples!

[VX275]

Ah the Chipmunk that wonderful result of a Polish designer working for a Canadian company and using an engine that could trace its history back to a pile of Great War surplus Renault engine spares. British industry at its best.

[kapton]

So what will the RAF do now? It has transferred virtually all control of its maintenance facilities to BAE. So how will it reconcile strategic decisions being taken by a foreign company over which it has no control. You could not make it up. The RAF transferred much of its capability to a company which specialises in cutting the wings off vintage aircraft to try and glue ill-fitting replacements on them, and periodically selling re-polished turds back to the MOD. That company is now about to pass into the control of a foreign company which is heavily backed by respective governments, who don't always hold the well-being of GB to their hearts. Mind you, if I worked for EADS I would be afraid, very afraid. I can imagine the conversation now. "Right boys we're just taking this Lancaster bomb aimers sight, nailing a sewing machine motor on it, and using it as the new freight door operating mechanism for the A380". "What, you want drawings"? "What happened to the last park drive packet I gave you? "All the info was on that".

[BEagle]

The quaintness of some of 't Bungling Baron's folk was always amusing...

At one VC10/TriStar JTIDS design meeting, both Marshall Aerospace (for the TriStar) and BWoS (for the VC10) gave quick installation presentations.

The MA chap was in a smart suit and delivered a very slick talk; his slides looked straight out of the Aircrew Manual, but with the new display and control panel already incorporated. Most impressive.

Then came the BWoS chap. He looked like some mad old professor, with a shirt whose frayed collar was already displaying an impressive dihedral angle. It wouldn't have surprised me if he had slide rule in his top pocket. His slides looked like yellowing parchment drawings of 'Ye Olde Vickerf Funbuf' with some items hastily added in crayon.... He then told us that the drawings had suffered a bit because the design office roof leaked.....:\

Surely those days are long gone now though....:hmm:

[Ogre]

Amazing isn't it, one little sniff of something BAE related and all the old antagonism comes wriggling out into the light.:ugh:

How about looking to the future and cogitate on how what is left of a UK based defence industry is going to survive, rather than grumbling about what might have been had things been done if you'd had your way....

[NutLoose]

The problem comes with stuff like the JSF, I am sure the Americans will love their secrets in the technology involved falling into Frances hands, one of their main competitors in the field, additionally, the American technology in the weapon systems used on our Nuclear submarines will then be shared again with Europe in a merger, something again I would think the US wouldn't be best pleased with. In fact I wouldn't think UK PLC would be please either as you would be handing over our secret submarine technology to Europe.

[Melchett01]

The US Govt are already saying they have yet to be consulted on the deal - doesn't take a reading age much above that of a 5 year old to work out what they are saying there. Plus the Spanish govt also have a minor stake in this and have yet to agree to it.

Plus the fund managers and banks are also now starting to realise just how many hurdles there are to this and the respective share prices have already dropped. It might be a good idea on paper, but I just can't see it happening.

But then again, over the years, we have sold off so much of our strategic infrastucture - airports, power generation, utility companies etc etc etc to the highest bidder, I very much doubt that Cameron et al will bat an eyelid at the thought of letting the final vestige of the UK defence industry slip into foreign control. If / when this deal does go tits up, it will be because investors realise it's a bad deal not because of strategic concerns.

[Duncan D'Sorderlee]

Melchett,

If only we sold them off to the highest bidder! What I suspect happened is probably slanderous or libelous!

Duncs:ok:

[Milo Minderbinder]

"sold" = given away in Tory language

[Rigga]

Ahhh yes!.... the misleading statement of "Shareholders vote" = when 90% of the shareholders (holding 10% of the shares) do as the 2% of shareholders (who hold 90% of the shares) say.

[sandozer]

As for foreign ownership of sensitive contracts, most of you will have heard of the Typhoon I guess.
Now let me see, I would imagine Captor and Dass on that particular aircraft are well up the manifoil tree. Selex Galileo/Finmeccanica have responsibilty for those and just happen to be an Italian company. In fact they inherited the whole of the expired GEC/Marconi empire. Amazing, but true.

[John Blakeley]

Am I correct in thinking that it was actually EADS management that decided to take the RAF Tanker conversion work away from Cobham (and MOD had a contract that let it happen) when the going got a bit rough? We can be sure that this merger would protect British jobs can't we!

[Jabba_TG12]

Equally interesting when one considers that a few years ago, Bae disposed of some of its interests in Airbus to become a subcontractor as opposed to a full partner.

In all honesty, if it goes through, I can see BAe upping sticks and leaving the UK once and for all once the Typhoon and F35 deals are done. Within 10 years. Especially if there are no other big projects forthcoming, ie further generation Astute/Trident replacement/Future Frigate, etc.

Pity how a great industry from post war, following nationalisation should end up like this, but there you go.

[Not_a_boffin]

Word on the street has been for a while that BAE want to get out of UK shipbuilding. Any BAE / EADS merger would probably include that divestment.

The £500M (or thereabouts) question, is who would buy it?

[Churchills Ghost]

One should like to think that something like this was about economies of scale, boosting productivity, expanding new markets and the like but, regrettably, I believe it is quite possibly driven by European and global politics more than by sound fiscal rationales.

The entire merger with EADS, from what I read, seems to lack any effective impetus from our side to preserve let alone protect British interests.

It seems to me as though Britain's aviation industry (in the proper sense of the word) was an idiosyncracy of the first half of the 20th century and which isolation from our modern world I find very sad.

https://lh5.googleusercontent.com/-qUPtoyCDLXM/T04WzRoJRsI/AAAAAAAAIJ8/if1OvubQtiY/s136/WC%2520s.png

[Anthony Supplebottom]

BAE/EADS Mega Merger 'On Brink Of Collapse' (http://news.sky.com/story/993833/bae-eads-mega-merger-on-brink-of-collapse)

[SRENNAPS]

BBC News - BAE-EADS merger: France and Germany 'must reduce stake' (http://www.bbc.co.uk/news/business-19863730)

I work for EADS Cassidian and to be honest I have no idea what the impact of a merger would mean to us.

However, I find it rather cynical of politicians to show an (a pretending??) interest in this when they have sold just about every other British Manufacturing company abroad over the years.
Hard talk from our politicians or just more hot air??

[Courtney Mil]

Yep! Good point, well made.

[backseatjock]

Less of a merger and more of a takeover methinks folks. EADS, with the strength of Airbus does not need a plan B and will, no doubt, continue on regardless if this proposed deal does not happen.

Have to wonder if BAE is in quite the same position and, if not, what its plan B might be. Doubt rumours, published in some of last week's media, of a merger with Rolls-Royce are true. True to say that stranger things have happened, I guess.

Also question whether the USG has changed its previously stated position regarding having little or no appetite to see a mega transAtlantic merger or acquisition. That would seem to rule out a takeover attempt by one of the big US companies.

Any thoughts fellow pruners?

[DADDY-OH!]

It will be dragged out as long as HMG want it to. Two of BAE's biggest plants at Warton & Salmesbury are very close to safe(ish) Tory seats.

Don't be surprised to see HMG using their veto at least once safeguard "...vital specialist manufacturing jobs in cutting edge technologies..." And of course, votes.

Followed in a couple of years, by former Politicians gaining seats on BAe's Board who will oversee further reduction in the size of BAe with production transferring to Saudi Arabia where production of future projects will be completed in a far less time, under or on budget by 'slave' labour from South West Asia, with aforementioned ex-HMG Politicians retiring on huge hold plated pensions, after writing their own 'redundancy' packages contributing to nothing except expanding the desolation & destruction of specialist engineering in the North West of England.

Crystal ball firmly tucked away inside soap box & heading off to bed.

Bah Humbug!

[DADDY-OH!]

That should be 'gold plated pensions'.

Sorry, a bit too much Cab' Sav'.

Good night.

[soddim]

A 13% shareholder, Invesco Perpetual, is also against the merger stating that BAE is a deal-junkie that ought to run its business better rather than seeking salvation through mergers and acquisitions.

BAE Systems is starting to look nastily exposed | Business blog (http://blogs.ft.com/businessblog/2012/10/bae-systems-is-starting-to-look-nastily-exposed/#axzz28i7296OG)

Amen to that.

[Pontius Navigator]

Ahhh yes!.... the misleading statement of "Shareholders vote" = when 90% of the shareholders (holding 10% of the shares) do as the 2% of shareholders (who hold 90% of the shares) say.

Late to the thread, but if 90% of shareholders hold 10% of the shares,
and 2% of the shareholders hold 90% of the shares,
what do the remaining 8% of shareholder hold?

[Rigga]

Look, I'm an old Rigga...wot d'you expect?

"Shareholders vote" = when 98% of the shareholders (holding 10% of the shares) do as the 2% of shareholders (who hold 90% of the shares) say.

[Rigga]

Of course a cynic might say it is much easier to hide your losses and mistakes in a bigger organisation.

Could it be that BAE is trying to retain the bulk of its manufacturing capability and avoid losing yet more manufacturing staff through yet more redundancies?

Sharing with other manufacturing organisations may give some respite from recent order-book figures.

[keesje]

Well it could offer possibilities / mass to develop competitive european fighters, fighterbombers, UAV and e.g MPAs. In timeframes that prevents us from filling in yesterdays requirements for tommorow, at double the costs. Or buy from the well financed US brothers.

[Heathrow Harry]

What this suggests is that BAe's numbers are truly awful - there is no point in getting into bed with EADS to help the defence side as they are principally civie providers

presumably BAe have run out of projects they can mis manage and grossly over charge on

[riverrock83]

Dead in the water due to politics:
BBC News - BAE-EADS merger cancelled amid political impasse (http://www.bbc.co.uk/news/business-19897699)

[Melchett01]

And now it's time to consider the future of the board of directors and execs at BAe. Frankly, this was never going to happen - far too much in the way of national and political interests at stake before you even start to take into account the thoughts of the Pentagon. And the movement up / down of the respective share prices once the announcement was made really told its own story of who would have been the likely benefactors of such a merger.

I would suggest that to appreciate such a fact did not take the wisdom of Solomon, the brains of an archbishop or require you to be a rocket scientist. So for the board to think otherwise, to my mind, points to a serious failure of appreciation and lack of judgement. Is that something we can really afford at the highest levels of (like it or not) a strategically significant organisation?

[Heathrow Harry]

or it was sooo desperate that any port in the storm would do,,,,,,,,,,,,,,

[NutLoose]

As one person on TV commented, if they were that desperate to get back into the Civil airline business again, why did they sell their share of EADs in the first place except to make a quick buck, Seems like they thought they could have their pie and eat it... Was never going to happen.

[Churchills Ghost]

Although he doesn't realise it, Cameron has an opportunity to re-shape the UK's aviation industry.

I would begin by culling the entire upper level of BAe's management, drafting a new corporate constitution which sets out some pretty basic and decent business values and by recruiting those with a track record of being able to manage professionally.

[tornadoken]

CG: Short (Ha!) of Nationalisation, HMG can't re-shape anything. If PM were to instruct MoD (or Vince Cable's Industry lot) to meddle, large bills would waft their way.

A proposed merger/takeover has lapsed. A daily event. Bankers and other leeches have lost fat fees. Bankers and hacks are pontificating about Plan B -such as merge with RR. Why? On this occasion, the Do Nothing Option is entirely legitimate. Instead of adding to the agenda of Main Board, flicking through Business Units' performance - 4 minutes each 4 times a year, some Units might now be unloaded. A daily event for conglomerates.

That's what BAES became when moving into Orange, Rover, Royal Ordnance...One of those was seen as fast flowing cash, the other 2 as Land Banks. BAES is not in the Britsh aero industry. There is no British aero industry. SBAC long ago became the Single British Aircraft Co. When he was at Defence Hoon (c.2003) declared this firm had no patrimony: when selecting sources he would be blind to its B. When they sold their Airbus SAS position, they themselves deleted the AE, to become a Systems Co. They then sold to Finmeccanica such (ex-Marconi et al) black box manufacture as remained. Today (bae)S plc is a trader of a portfolio of assets - Companies, trying to minimise ownership of touch labour. So are Boeing, LMAC, NG. Some operating Units retain engineering flair, despite, not because of any central Corporate culture. Those can/will be sold profitably, the laggards gently expiring. It does not matter in the slightest whether the buyer of a switched-on Unit is Brit or Timbuktu. Its jobs will stay onshore for exactly as long as that makes financial sense to the proud owner. Ministers cannot influence any of this, because they must buy the best kit for the job. Not prop up jobs on kit no-one wants.

[Rigga]

Completely correct!

BAE SYSTEMS is probably more akin to being 140 different companies working under a single Logo but linked to a single share system. Their methods, management targets and even profit margins may be different from other branches under the same Logo