Clinton gives BAe green light to bid for US defence firms

THE CLINTON administration has given British Aerospace the green light to mount takeovers of US defence companies, it emerged yesterday.

BAe has also been told that it will officially be classed as a US company when bidding for defence contracts from the Pentagon. The moves represent an important breakthrough for BAe and bring closer the prospect of a transatlantic global defence grouping with BAe at its centre. John Weston, BAe's chief executive, said yesterday that it had been told by the US government in recent weeks that further acquisitions in the US would be "welcomed".

The message was reinforced during a private dinner a fortnight ago between Mr Weston and John Hamre, the deputy US defense secretary.

Mr Hamre is understood to have told Mr Weston that Washington was opposed to either a "fortress Europe" or "fortress America" approach to defence consolidation. While a merger between BAe and one of the three big US defence contractors - Boeing, Raytheon and Lockheed Martin - would not be feasible at the moment, the company was encouraged to look at ways of expanding its transatlantic activities.

Mr Weston would not be drawn on whether BAe was contemplating a US acquisition but indicated that it might be prepared to spend several hundred million pounds increasing its presence in the US.

BAe is due to unveil its new corporate identity and business strategy on 30 November following the pounds 6.3bn takeover of GEC's defence electronics business. GEC already had a significant presence in the North American market following the $1.4bn takeover of the US defence electronics company Tracor in June, 1998.

The "New BAe" will have 18,500 employees in North America and will be the world's third biggest defence company after Boeing and Lockheed. The group is expected to retain the initials BAe in its new identity although it will drop the word "British".

Speaking at an aerospace lunch in London, Mr Weston reiterated his vision of the defence industry being carved up between two or three global players. He said the three big US groupings now had a choice of partner on this side of the Atlantic between BAe and the new European Aeronautics, Defence and Space company formed through the merger of Germany's Dasa and Aerospatiale-Matra of France.

Mr Weston declined to say which partner in the US BAe would pick but he conceded that the regulators would not permit a merger between Boeing and any of the four partners in Airbus in their present forms.