BAe to clinch pounds 16bn Marconi merger

BRITISH AEROSPACE was last night close to agreeing a pounds 16bn merger with Marconi, GEC's defence electronics division, in a deal which marks the start of the long-awaited consolidation of Europe's arms industry.

Sources close to the companies said the purchase could be announced this week, possibly at a GEC board meeting on Wednesday. They said that after a weekend of frantic negotiation, BAe emerged as the clear front runner for Marconi ahead of Thomson CSF of France.

Marconi's two US suitors, Lockheed and Northrop Grumman, are thought to have dropped out last week. BAe is believed to have offered around pounds 8bn for Marconi, which last year had sales of pounds 3.6bn and profit of pounds 400m. Insiders said Thomson, of which the French government owns 40 per cent, was last night considering whether to raise its offer to match BAe. "BAe is the clear favourite, but the Thomson option is still alive," a source said.

However, he warned that time was running out for the French group and hinted that GEC wanted to clinch a deal before the end of the week. "We are days away from a deal," another insider said. BAe and GEC declined to comment.

BAe-Marconi would be a leading force in the global defence sector, with sales of pounds 14bn and market capitalisation of pounds 16bn. It could realise cost savings of pounds 250m, say analysts.

The companies are thought to have allayed UK government fears that the sale of Marconi to a British company would delay the consolidation of Europe's defence industry. BAe is thought to have told ministers that the Marconi deal would be a springboard for European deals.

DaimlerChrysler Aerospace (Dasa) of Germany would be a prime candidate to join the enlarged BAe in the near future. Dasa, whose merger with BAe was scuppered by GEC's intervention last year, was kept informed of the Marconi negotiations. "There would not be a deal unless it facilitated a German move. The Germans have been kept in constant touch and have bought into [the deal] in one way or another," a source said.

Under the terms of the deal being discussed, BAe would offer GEC investors over pounds 6bn in shares of the enlarged group, leaving them with about 40 per cent of the new BAe-Marconi. It would take on around pounds 1.5bn of Marconi's debt. The new company would be headed by Sir Richard Evans, BAe chairman.

The proceeds of the Marconi sale are likely to be used by GEC to boost its non-defence operations. The company has extensive telecoms and industrial electronics interests in Europe and the US. GEC managing director, Lord Simpson, has often indicated his desire to increase its presence in high- growth markets.

News
The Banksy image in Folkestone before it was vandalised
people
Life and Style
tech

Sales of the tablet are set to fall again, say analysts

Sport
Louis van Gaal at the Hawthorns prior to Manchester United's game against West Brom
football

Follow the latest updates from the Monday night Premier League fixture

News
i100
PROMOTED VIDEO
News
Brian Harvey turned up at Downing Street today demanding to speak to the Prime Minister
news

Met Police confirm there was a 'minor disturbance' and no-one was arrested

Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010
films

George Lucas criticises the major Hollywood film studios

Voices
Chris Grayling, Justice Secretary: 'There are pressures which we are facing but there is not a crisis'
voices

Does Chris Grayling realise what a vague concept he is dealing with?

Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

News
Blackpool is expected to become one of the first places to introduce the Government’s controversial new Public Space Protection Orders (PSPOs)
news

Concerns raised phenomenon is threatening resort's image as a family destination

Life and Style
gaming

I Am Bread could actually be a challenging and nuanced title

News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Customer Service Executive / Inbound Customer Service Agent

£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Project Coordinator - 12 month contract

£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

Day In a Page

Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

How We Met: Hugh Bonneville & Peter James

'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

Bill Granger's heavenly crab recipes

Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
Radamel Falcao: How faith and love drive the Colombian to glory

Radamel Falcao: How faith and love drive the Colombian to glory

After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

Terry Venables column

Premier League managers must not be allowed to dictate who plays and who does not play for England
The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

Michael Calvin's Inside Word

Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past