BAe and Matra set to create missiles giant: Talks on details of merger could last for months

BRITISH AEROSPACE and Matra Hachette of France yesterday confirmed plans to merge their guided weapons activities, forming a missiles giant with annual sales of around pounds 1bn.

The companies hope to cut the development costs of future product generations, but a more immediate aim is to make their products compatible to gain access to each other's overseas markets.

BAe said the proposals followed the trend to rationalisation in the missiles business worldwide. A spokesman said no other firms were involved in the current talks. However, other potential partners are thought to include Aerospatiale and Deutsche Aerospace.

BAe said that the current negotiations concerned the financial details of a merger and that there were no discussions about joint development of new products. The talks could go on for months.

BAe's guided weapons operation employs about 6,000 people at Stevenage, Hertfordshire, and Lostock, Greater Manchester. Matra's missile business employs 3,200.

BAe said that in 1992 both businesses had more or less equal sales of about pounds 500m and that both were profitable.

BAe said the products of the two companies were largely complementary. The British company was particularly strong in air-to-air missiles while Matra was a key ground-to- air missile maker. The French company was about to start production of an air-launched missile.

BAe's range includes the Seawolf and Sky Flash guided missiles and the Alarm anti-radar missile. It has been awarded a pounds 500m contract by the Ministry of Defence to produce the Advanced Short-Range Air-to-Air Missile.

British Aerospace had previously tried to form a missiles joint venture with Thomson of France. Talks between the two dragged on for 18 months and collapsed in January 1991. Thomson has since forged links with Short Brothers of Belfast.

The deal with Matra reflects BAe's drive to form joint ventures with foreign companies in an attempt to offset the decline in defence markets worldwide.